Posted by Halim on April 24, 19100 at 05:40:50:
One last thing, I was going through analysis of income account in Security Analysis 1934 Edition, and came across the losses on inventory and I still couldn't figure it out. Supposing under extraordinary business conditions," writedowns of inventories to market value are regarded as properly chargeable against the year's income and not against surplus."( Excerpt from pg 365).
How could that be possible, since according to accounting rules inventory are treated as assets, hence it should not be charged against income.
Also, since inventory is part of the balance sheet, any reduction in the inventory amount should also be reflected in the surplus.
Can you help explain to me about this matter?
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