Accounts Receivable Clerk Interview Question:

Tell us how does an inventory write down affect the three statements?

Submitted by: Muhammad

On the balance sheet the asset account of Inventory is reduced by the amount of the write down, and so is shareholders' equity. The income statement is hit with an expense in either COGS or a separate line item for the amount of the write down, reducing net income. On the cash flow statement, the write down is added back to CFO as it's a non-cash expense but must not be double counted in the changes of non-cash working capital.
Submitted by: Muhammad