CFA L1 - Inventories - How does an inventory write down increase cost of sales?

CFA Level I FRA
#1

How does an inventory write-down increase cost of sales?

#2

Assets go down, expenses go up.

#3

Hello!

Thanks for responding, inventory write-down will decrease the value of assets on the balance sheet and a loss will be recorded in the income statement. Not sure how it directly impacts the cost of sales ( cost of goods sold).

#4

The place on the income statement where it appears is COGS.

When you sell an item – a Ferrari, say – you reduce the value of your inventory, and that reduction of value is included in COGS on the income statement.

Similarly, when your inventory is written down, you reduce the value of your inventory, and that reduction of value is included in COGS on the income statement.

#5

thank you!!!

#6

Thank you

#7

My pleasure.

#8

You’re welcome.