JulieS
Expert Alumni

Deductions & credits

Discarded inventory is accounted for in the inventory calculation. It becomes Cost of Goods Sold.

 

For example say your beginning inventory is $20,000, about a quarter of that is old. You throw out $5000 of inventory. You ending inventory is now $15,000.

 

I am leaving out the normal things that affect your inventory such as sales and new purchases, just to keep the point clear.

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