![]() ![]() Note: You might have also heard the term “ inventory write-off,” which is very similar, but there’s a slight different. The write-down affects your business balance sheet and income statement, and it can cause a drop in net income, which, in turn, reduces the shareholder equity and retained earnings. When inventory loses partial value, it must be recorded as an inventory write-down expense on a company’s balance sheet, and it must be made as soon as possible to lessen tax liability. ![]() What is an inventory write-down?Īn inventory write-down, also referred to as “inventory impairment,” is an accounting term that recognizes when your inventory’s market value falls below the book value, but it still considered sellable. In this article, learn what an inventory write-down entails, inventory accounting best practices, and how a 3PL like ShipBob can help you better track, manage, and report on your inventory. When this occurs, an inventory write-down is required to ensure you still end up with healthy profit margins. ![]() I t’s not uncommon to report a small loss due to inventory value depreciation. But, in the real world, things work a little differently. In an ideal scenario, when all your inventory gets sold at a net profit, you achieve maximum ROI. Running an online business, it’s important to keep value depreciation in mind when tracking, managing, and reporting on inventory. Unless it’s an original Picasso painting or a classic Chanel handbag, most tangible items lose their value over time. ![]()
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