The write down of inventory journal entries below act as a quick reference, and set out the most commonly encountered situations when dealing with the double entry posting of inventory write downs.
In each case the write down of inventory journal entries show the debit and credit account together with a brief narrative. For a fuller explanation of journal entries, view our examples section.
Typical Write Down of Inventory Journal Entries
Here are some common inventory write-down journal entries:
To write down obsolete inventory
| Account |
Debit |
Credit |
| Loss on inventory write down |
XXX |
|
| Allowance for obsolete inventory |
|
XXX |
To write off inventory
| Account |
Debit |
Credit |
| Loss on inventory write down |
XXX |
|
| Inventory |
|
XXX |
Write off inventory using a fully provided obsolescence allowance
| Account |
Debit |
Credit |
| Allowance for obsolete inventory |
XXX |
|
| Inventory |
|
XXX |
To write off inventory using a partially provided obsolescence allowance
| Account |
Debit |
Credit |
| Allowance for obsolete inventory |
XXX |
|
| Cost of goods sold account |
XXX |
|
| Inventory |
|
XXX |
Disposal of obsolete inventory at net book value for cash
| Account |
Debit |
Credit |
| Cash |
XXX |
|
| Inventory |
|
XXX |
| Allowance for obsolete inventory |
XXX |
|
To dispose of obsolete inventory at a loss on net book value for cash
| Account |
Debit |
Credit |
| Cash |
XXX |
|
| Inventory |
|
XXX |
| Allowance for obsolete inventory |
XXX |
|
| Cost of goods sold |
XXX |
|
To dispose of obsolete inventory at a profit on net book value for cash
| Account |
Debit |
Credit |
| Cash |
XXX |
|
| Inventory |
|
XXX |
| Allowance for obsolete inventory |
XXX |
|
| Cost of goods sold |
|
XXX |
Conclusion
In conclusion, inventory write-downs are an important accounting concept that helps businesses accurately reflect their inventory’s value. Consequently inventory write-down journal entries refer to the adjustments made to the value of inventory items due to their lower market value or obsolescence. These adjustments are made to reflect the accurate value of inventory in a business’s financial statements.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years in all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.
