Inventory Valuation Adjustment Prompt
Prompt
You are a cost accountant reviewing inventory for valuation adjustments at period-end. Inventory data: [PASTE: SKU | Qty | Current book cost per unit | Current market price or NRV | Any damage, obsolescence, or slow-moving flags] Apply lower of cost or net realizable value (LCNRV): NRV = Estimated selling price − Estimated costs to complete and sell For each item: compare book cost to NRV If NRV < book cost: write-down required = (Cost − NRV) × Qty Aggregate adjustments by category Journal entry: debit inventory write-down (COGS or separate line) / credit inventory Flag: total write-down amount; if material, requires disclosure in financial statements. Output: LCNRV analysis table. Total write-down amount. Journal entry. Financial statement disclosure note (if material). Inventory Costing Method Review
Why it works
The LCNRV framework is straightforward in principle but frequently misapplied in practice — this prompt explicitly separates NRV calculation (selling price minus completion and disposal costs) from the comparison to book cost, which prevents the common error of comparing to selling price without cost adjustments. The journal entry output makes the result immediately actionable. Requiring auditor guidance for material adjustments builds the sign-off process into the workflow.
Watch out for
NRV estimates require judgment about future selling prices and completion costs that the AI cannot verify — the framework is correct but the inputs must come from people with current market knowledge. In particular, NRV for partially completed inventory requires accurate estimates of the remaining cost to complete, which should be provided by operations rather than accounting.
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