Accounting For Merchandising Organizations Db

First of all , we ought to state that all companies argon coterminous the prudence concept , which is an important accounting principle , by writing off extend to the lower of salute or net realizable cherish . The prudence concept states that probationary profits can non be reflected in the accounts until they are cognise . thusly if the net realizable of stock is lower than cost consequently the stock comfort should be written dismantle to its single book value . Organizations that work in the proficient manufacture , like Nortel Networks , normally face the issue of out of date stock . The rapid technological advancements that are taking power are diminishing the live of stock . As briefly as a new product with better capabilities is issued , the forward goods of the same category are no longer demanded . For object lesson , as soon as the Pentium 4 was issued , the demand for Pentium 3 rock-bottom steadily and drastically . Due to much(prenominal)(prenominal) feature , Nortel Networks ordinarily ends up with old stock that will non be sold since there is no longer demand for such product .

These companies are required to write off the value of the stock in line with the prudence concept in to portray its true net realizable valueIf stock that is written down is eventually sold , such transaction should be reflected in the accounts . As regards Micron Technology they are not portraying all the respective minutes if th ey will not record the sale . However , bef! ore taking whatsoever drastic actions , one should consider the materiality of such proceeding . If they are not material , they are therefore not significant and will not alter the decision of all external users if shown . Indeed Micron Technology has probably fain an accounting policy concerning such stock , which describes their methodReferenceHendriksen S . E Van Breda F . M (1992 . invoice Theory . ordinal number Edition . New York : Irwin McGraw-Hill Companies IncorporationWood F Sangster A (2002 . Business score 1 . Ninth Edition London : Prentice HallPAGEPAGE 1...If you collar to get a full essay, order it on our website: OrderCustomPaper.com

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