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In the context of Inventory valuation, what is Net Realisable Value, When might it be used,...

In the context of Inventory valuation, what is Net Realisable Value, When might it be used, and why?

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Answer #1

Net realisable value means Selling price of the inventory in the normal course of the businee.

Inventory cannot be valued more than the net realisable value Since company cannot realise more than market price of that inventory. If inventory valued more that net realisabe value than at later point of time when inventory sold revovarability will be less than the carrying value and balance will be loss.

While calculating inventory value net realisable value should take in to consideration for correct valuation of inventory.

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