Definition of Obsolete inventory:
Obsolete inventory is a term that refers to inventory that is at the end of its product life cycle. This inventory has not been sold or used for a long period of time and is not expected to be sold in the future. This type of inventory has to be written-down or written-off and can cause large losses for a company.
Obsolete inventory is also referred to as dead inventory or excess inventory.
A companys inventory that has no additional usage or sales capability because it has reached the end of its product life cycle. In many cases, this type of inventory may cause losses on a companys balance sheet and overall profitability.
How to use Obsolete inventory in a sentence?
- Obsolete inventory is inventory at the end of its product life cycle that needs to be either written-down or written-off the company's books.
- When obsolete inventory is disposed of, both the related amount in the inventory asset account and the contra asset account are removed in the disposal journal entry.
- The contra asset account is netted against the full inventory asset account to arrive at the current market value or book value.
- Obsolete inventory is written-down by debiting expenses and crediting a contra asset account, such as allowance for obsolete inventory.
Meaning of Obsolete inventory & Obsolete inventory Definition