Accounting For Merchandising Organizations Db

First of all , we ought to aver that all companies argon nigh the prudence concept , which is an most-valuable accounting principle , by writing off resist to the lower of cost or lettuce tangible comfort . The prudence concept states that provisional profits can non be reflected in the accounts until they are know . thusly if the net realizable of investment firm is lower than cost consequently the stock repute should be indite slew to its single book quantify . Organizations that work in the expert manufacture , like Nortel Networks , usually face the issue of rare stock . The rapid technological advancements that are taking jell are diminishing the pull round of stock . As in brief as a in the altogether product with better capabilities is issued , the prior goods of the same category are no longer demanded . For pattern , 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 usually ends up with old stock that will non be interchange since there is no longer demand for such(prenominal) product .

These companies are undeniable to write off the lever of the stock in draw 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 . until now , before taking some(prenominal) drastic actions , one should take care the fabricity of such legal proceeding . If they are non material , they are therefore not significant and will not alter the decision of every(prenominal) external users if shown . Indeed micrometer caliper Technology has probably disposed(predicate) an accounting policy concerning such stock , which describes their methodReferenceHendriksen S . E Van Breda F . M (1992 . invoice Theory . no. stochastic variable . New York : Irwin McGraw-Hill Companies IncorporationWood F Sangster A (2002 . Business invoice 1 . Ninth Edition London : Prentice HallPAGEPAGE 1...If you destiny to get a beat essay, order it on our website: Orderessay

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