Business – 10.1 Financial statements – Statement of profit or loss | e-Consult
10.1 Financial statements – Statement of profit or loss (1 questions)
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Answer 3:
The loss on inventory write‑off is the difference between cost and NRV:
| Cost of inventory | £20,000 |
| Net realizable value | £12,000 |
| Loss on write‑off | £8,000 |
In the statement of profit or loss, the £8,000 loss will be shown under Other expenses or a specific line such as “Loss on inventory write‑off”.
Journal entry:
- Debit: Loss on inventory write‑off £8,000
- Credit: Inventory £8,000
This reduces both the profit for the period and the carrying amount of inventory on the balance sheet.