CA Foundation Exam > CA Foundation Questions > Estimated selling price less estimated cost o...
Start Learning for Free
Estimated selling price less estimated cost of sales is
- a)Net Realizable Value
- b)Cost of purchase
- c)Cost of goods sold
- d)None
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
Estimated selling price less estimated cost of sales isa)Net Realizabl...
Estimated selling price less estimated cost of sales is known as Net Realizable Value. This is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs are unnecessary to make a sale.
Free Test
FREE
| Start Free Test |
Community Answer
Estimated selling price less estimated cost of sales isa)Net Realizabl...
Net Realisable Value
Net Realisable Value (NRV) refers to the estimated selling price of goods, less the estimated costs of sales necessary to make the sale. It is the amount of revenue a company expects to generate from the sale of inventory.
Calculating Net Realisable Value
To calculate the Net Realisable Value, you need to consider two factors:
1. Estimated Selling Price: This is the expected price at which the inventory will be sold. It is based on market conditions, demand, and other relevant factors.
2. Estimated Cost of Sales: This includes all the costs associated with selling the inventory, such as transportation, packaging, sales commissions, and any other expenses directly attributable to the sale.
Importance of Net Realisable Value
Net Realisable Value is an essential concept in inventory valuation. It helps businesses in making informed decisions about the value of their inventory and its potential profitability. By subtracting the estimated cost of sales from the estimated selling price, companies can determine the net value of their inventory. This information is crucial for financial reporting, determining profitability, and making strategic business decisions.
Example
Let's consider an example to understand the concept better. Suppose a company has inventory worth $10,000. The estimated selling price for this inventory is $12,000. The estimated cost of sales, including transportation and packaging, is $1,500.
To calculate the Net Realisable Value, we subtract the estimated cost of sales from the estimated selling price:
Net Realisable Value = Estimated Selling Price - Estimated Cost of Sales
= $12,000 - $1,500
= $10,500
In this example, the Net Realisable Value of the inventory is $10,500. This means that the company expects to generate $10,500 in revenue from the sale of this inventory, after accounting for all the associated costs.
Conclusion
Net Realisable Value is a crucial concept in inventory valuation. It helps businesses determine the potential profitability of their inventory by considering the estimated selling price and the estimated cost of sales. By calculating the Net Realisable Value, companies can make informed decisions about inventory management, pricing, and profitability.
Net Realisable Value (NRV) refers to the estimated selling price of goods, less the estimated costs of sales necessary to make the sale. It is the amount of revenue a company expects to generate from the sale of inventory.
Calculating Net Realisable Value
To calculate the Net Realisable Value, you need to consider two factors:
1. Estimated Selling Price: This is the expected price at which the inventory will be sold. It is based on market conditions, demand, and other relevant factors.
2. Estimated Cost of Sales: This includes all the costs associated with selling the inventory, such as transportation, packaging, sales commissions, and any other expenses directly attributable to the sale.
Importance of Net Realisable Value
Net Realisable Value is an essential concept in inventory valuation. It helps businesses in making informed decisions about the value of their inventory and its potential profitability. By subtracting the estimated cost of sales from the estimated selling price, companies can determine the net value of their inventory. This information is crucial for financial reporting, determining profitability, and making strategic business decisions.
Example
Let's consider an example to understand the concept better. Suppose a company has inventory worth $10,000. The estimated selling price for this inventory is $12,000. The estimated cost of sales, including transportation and packaging, is $1,500.
To calculate the Net Realisable Value, we subtract the estimated cost of sales from the estimated selling price:
Net Realisable Value = Estimated Selling Price - Estimated Cost of Sales
= $12,000 - $1,500
= $10,500
In this example, the Net Realisable Value of the inventory is $10,500. This means that the company expects to generate $10,500 in revenue from the sale of this inventory, after accounting for all the associated costs.
Conclusion
Net Realisable Value is a crucial concept in inventory valuation. It helps businesses determine the potential profitability of their inventory by considering the estimated selling price and the estimated cost of sales. By calculating the Net Realisable Value, companies can make informed decisions about inventory management, pricing, and profitability.
|
Explore Courses for CA Foundation exam
|
|
Top Courses for CA FoundationView all
Question Description
Estimated selling price less estimated cost of sales isa)Net Realizable Valueb)Cost of purchasec)Cost of goods soldd)NoneCorrect answer is option 'A'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Estimated selling price less estimated cost of sales isa)Net Realizable Valueb)Cost of purchasec)Cost of goods soldd)NoneCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Estimated selling price less estimated cost of sales isa)Net Realizable Valueb)Cost of purchasec)Cost of goods soldd)NoneCorrect answer is option 'A'. Can you explain this answer?.
Estimated selling price less estimated cost of sales isa)Net Realizable Valueb)Cost of purchasec)Cost of goods soldd)NoneCorrect answer is option 'A'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Estimated selling price less estimated cost of sales isa)Net Realizable Valueb)Cost of purchasec)Cost of goods soldd)NoneCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Estimated selling price less estimated cost of sales isa)Net Realizable Valueb)Cost of purchasec)Cost of goods soldd)NoneCorrect answer is option 'A'. Can you explain this answer?.
Solutions for Estimated selling price less estimated cost of sales isa)Net Realizable Valueb)Cost of purchasec)Cost of goods soldd)NoneCorrect answer is option 'A'. Can you explain this answer? in English & in Hindi are available as part of our courses for CA Foundation.
Download more important topics, notes, lectures and mock test series for CA Foundation Exam by signing up for free.
Here you can find the meaning of Estimated selling price less estimated cost of sales isa)Net Realizable Valueb)Cost of purchasec)Cost of goods soldd)NoneCorrect answer is option 'A'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
Estimated selling price less estimated cost of sales isa)Net Realizable Valueb)Cost of purchasec)Cost of goods soldd)NoneCorrect answer is option 'A'. Can you explain this answer?, a detailed solution for Estimated selling price less estimated cost of sales isa)Net Realizable Valueb)Cost of purchasec)Cost of goods soldd)NoneCorrect answer is option 'A'. Can you explain this answer? has been provided alongside types of Estimated selling price less estimated cost of sales isa)Net Realizable Valueb)Cost of purchasec)Cost of goods soldd)NoneCorrect answer is option 'A'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice Estimated selling price less estimated cost of sales isa)Net Realizable Valueb)Cost of purchasec)Cost of goods soldd)NoneCorrect answer is option 'A'. Can you explain this answer? tests, examples and also practice CA Foundation tests.
|
|
Explore Courses for CA Foundation exam
|
|
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
|
Signup on EduRev and stay on top of your study goals
10M+ students crushing their study goals daily