Allowance for Slow-moving Inventory
Code: 1154
👁 Views: 177
Account Information
| Financial Statement | Statement of Financial Position |
| Normal Balance | Credit |
Definition
Estimated value of slow-moving goods that may not be sold within the normal period.
Common Journal Entries
Create allowance for slow-moving inventory based on inventory analysis
Dr. Slow-moving Inventory Expense
Cr. Allowance for Slow-moving Inventory
📐 IFRS vs US GAAP Accounting Treatment
IFRS
IAS 2
Inventories
US GAAP
ASC 330
Inventory
❓ Frequently Asked Questions
Q: When is a slow-moving inventory allowance created?
A: It is created when indicators show that goods will not move within the normal period (e.g., outdated model, change in market demand).
Q: What is the difference between slow-moving and obsolete/damaged allowance?
A: Slow-moving allowance for goods that move slowly (may sell at a large discount). Obsolete/damaged allowance for damaged or completely unsalable goods.
Q: How is slow-moving allowance estimated?
A: Based on inventory turnover analysis, expiry dates, changes in market demand, and expected future sales percentage.