Accounting For Merchandising Organizations Db

First of all , we ought to state that all companies argon contiguous the prudence concept , which is an important accounting principle , by writing off extend to the lower of bell or net realizable cherish . The prudence concept states that probationary profits can non be reflected in the accounts until they are recognise . thusly if the net realizable of stock is lower than cost consequently the stock range should be written cumulus to its single book value . Organizations that work in the technical manufacture , like Nortel Networks , normally face the issue of old stock . The rapid technological advancements that are taking adorn are diminishing the live of stock . As in brief as a new product with better capabilities is issued , the preceding goods of the same category are no longer demanded . For pillow slip , 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 normally 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 they will non record the sale . However , before ta! king some(prenominal) drastic actions , one should consider the materiality of such transactions . If they are not material , they are therefore not significant and will not alter the decision of either external users if shown . Indeed Micron Technology has probably lief an accounting policy concerning such stock , which describes their methodReferenceHendriksen S . E Van Breda F . M (1992 . invoice Theory . no. Edition . New York : Irwin McGraw-Hill Companies IncorporationWood F Sangster A (2002 . Business be 1 . Ninth Edition London : Prentice HallPAGEPAGE 1...If you urgency to get a full essay, order it on our website: OrderCustomPaper.com

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