Inventory Reserve

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DEFINITION of 'Inventory Reserve'

An accounting entry that represents a deduction from earnings for the purpose of fairly and reasonably representing the value of inventoried assets on a balance sheet. The inventory reserve is used to make up for the fact that all inventory will not be sold at the cost to the firm.

BREAKING DOWN 'Inventory Reserve'

An inventory reserve is a contra account on a balance sheet, and an important part of inventory accounting in GAAP.

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RELATED FAQS
  1. What are the generally accepted accounting principles for inventory reserves?

    As with most matters related to generally accepted accounting principles (GAAP), accountants assigned with the task of applying ... Read Full Answer >>
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    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
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    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
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    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  5. How do dividend distributions affect additional paid in capital?

    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>
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