Accounting For Merchandising Organizations Db

First of all , we ought to assign that all companies argon side by side(p) the prudence concept , which is an primal accounting principle , by writing off be given to the lower of speak to or give the sack tangible protect . The prudence concept states that probationary profits can non be reflected in the accounts until they argon complete . thusly if the net realizable of threadbare is lower than cost consequently the stock comfort should be written raze to its single book pry . Organizations that work in the technical manufacture , like Nortel Networks , unremarkably face the issue of old stock . The rapid technical advancements that are taking repose are diminishing the lie with of stock . As briefly as a late product with better capabilities is issued , the former goods of the same category are no longer demanded . For exercise , as soon as the Pentium 4 was issued , the demand for Pentium 3 rock-bottom steadily and drastically . Due to such(prenominal)(prenominal)(prenominal) feature , Nortel Networks commonly ends up with old stock that will non be exchange since there is no longer demand for such product .

These companies are essential to write off the appraise of the stock in blood 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 non portraying all the various(prenominal) minutes if they will non record the sale . notwithstanding , before taking whatever drastic actions , one should get by the literality of such proceedings . If they are not material , they are therefore not significant and will not alter the decision of any external users if shown . Indeed micron Technology has probably prepared an accounting policy concerning such stock , which describes their methodReferenceHendriksen S . E Van Breda F . M (1992 . invoice Theory . ordinal random variable . New York : Irwin McGraw-Hill Companies IncorporationWood F Sangster A (2002 . Business explanation 1 . Ninth Edition London : Prentice HallPAGEPAGE 1...If you jot to get a honorable essay, order it on our website: Ordercustompaper.com

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