Accounting - Application of 'lower of cost' and 'net-realisable value'
(NRV) rule
Application of 'lower of cost' and 'net-realisable value' (NRV) rule
This rule is applied to individual stock items. It is important that
students can adequately define each of these terms. Below is an example of
an application of that rule.
Required
Complete the following table by calculating value of stock on hand at the
end of the period.
ITEM
COST
NRV
QUANTITY
VALUE
Printers
450
490
10
4 500
Modems
150
120
6
720
Scanners
300
400
20
6 000
Total
11 220
The typing in bold is the solution to this question. Do not forget to
include the total. You may be asked why the net realisable value for
this brand of modem is lower than cost.
Interactive SWF
reasons may include
later, more technically advanced models are now available
later models are cheaper
there has been a fall in demand for modems
later models have modems already built into computers
reasons for stock loss may include
theft by customers and staff
wastage, obsolescence and items exceeding their use by date
other invoicing, which occurs when a business is charged more for goods than are actually delivered
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Application of lower of cost and net -realisable (NRV) are very important in stock keeping.
Net Realizable Value is the estimated selling price in the ordinary course of business minus any cost to complete and to sell goods.
Application of lower of cost' and 'net-realisable value' (NRV) rule is importnant
lower of cost' and 'net-realisable value
Accounting -> Application of 'lower of cost' and 'net-realisable value' (NRV) rule Application of 'lower of cost' and 'net-realisable value' (NRV) rule This rule is applied to individual stock items. It is important that students can adequately define each of these terms. Below is an example of an application of that rule. Required Complete the following table by calculating value of stock on hand at the end of the period. Item Cost NRV Quantity Value Printers 450 490 10 4 500 Modems 150 120 6 720 Scanners 300 400 20 6 000 Total 11 220 The typing in bold is the solution to this question. Do not forget to include the total. You may be asked why the net realisable value for this brand of modem is lower than cost.
Very fruitful course. No question.
so true, sometimes we forget about technology increasing, and constantly changing, you may want to think before getting into this business, there is a huge chance to take.
What is an application of NRV Rule?
usefull
ok