What is inventory damage?

Inventory damage is a process that is used to adjust the value of inventory based on the current market value of individual goods that are currently held in this inventory. Usually, the process is used in the process of declaration of certain obsolete items and is able to mark them from the inventory for disposal. From this point of view, the damage is very important because the company pays taxes on the current accounting value of the total stock value.

One way to understand how inventory damage works is to consider a manufacturing company that carries a costly part of the machine that was once necessary for the production process. In recent years, these machines have been replaced by something newer and more efficient, but components related to older machines have been maintained in stock supplies, with more than the usual annual depreciation. Using the inventory damage, it is possible to detect the current market value for these parts and adjusted an accounting value that reflects this market value. If there is no longer a market for these crumbsAt all, society can be able to move around the process of damage and declare parts outdated and worthless, legally remove them from inventory.

Using inventory damage is very useful for maintaining accurate values ​​for inventory. Since most governments have tax regulations that require taxation of any type of company inventory, it is very important to ensure that the accounting value of these inventories is justifiable in terms of current market value. Without involving inventory damage to determine when and whether the accounting value needs to be adjusted, there is a great chance that the company will pay more in the necessary taxes. This in turn means that the company has less net profit to turn back to the business itself.

Normal companies are involved in damage to stocks every time the physical numbers of the existing inventory are made. During the inventory, notes are related toThe high price items that have not seen any real use have not seen in some time. Hence the task will include whether the items are still useful for the company and what the difference between what the items would bring if they were sold in the open market and the current value of the unit transmitted in the accounting records. Using this process, the Company can make an accounting value, sometimes known as loss of deterioration, so the inventory value is more in line with the market value for the same items.