Accounting For Merchandising Organizations Db

First of all , we ought to state that all companies argon neighboring the prudence concept , which is an important accounting principle , by writing off extend to the lower of cost or net realizable cherish . The prudence concept states that conditional profits can non be reflected in the accounts until they are complete . thusly if the net realizable of stock is lower than cost consequently the stock mensurate should be scripted down(p) to its single book value . Organizations that work in the expert manufacture , like Nortel Networks , normally face the issue of obsolescent stock . The rapid technological advancements that are taking prat are diminishing the live of stock . As curtly as a new product with better capabilities is issued , the prior goods of the same category are no longer demanded . For exemp lification , as soon as the Pentium 4 was issued , the demand for Pentium 3 rock-bottom steadily and drastically . Due to such(prenominal)(prenominal) feature , Nortel Networks commonly 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 non portraying all the respective minutes if the y will not record the sale . However , befo! re taking some(prenominal) drastic actions , one should consider the materiality of such proceedings . If they are not material , they are therefore not significant and will not alter the decision of every(prenominal) external users if shown . Indeed Micron Technology has probably inclined(predicate) an accounting policy concerning such stock , which describes their methodReferenceHendriksen S . E Van Breda F . M (1992 . invoice Theory . ordinal Edition . New York : Irwin McGraw-Hill Companies IncorporationWood F Sangster A (2002 . Business invoice 1 . Ninth Edition London : Prentice HallPAGEPAGE 1...If you nip to get a full essay, order it on our website: OrderCustomPaper.com

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