What is LCM accounting?
Understand the Problem
The question is asking for an explanation of what LCM means in the context of accounting. LCM typically refers to 'Lower of Cost or Market', a valuation method used in accounting.
Answer
The principle that requires businesses to report inventory at the lower of its historical cost or current market value
Lower of Cost or Market (LCM) is an accounting principle that requires businesses to report the value of their inventory at the lower of its historical cost or current market value.
Answer for screen readers
Lower of Cost or Market (LCM) is an accounting principle that requires businesses to report the value of their inventory at the lower of its historical cost or current market value.
More Information
This principle is a conservative approach used to avoid overstating asset values on financial statements.
Tips
Common mistakes include not updating inventory values accurately or not applying the LCM principle consistently across periods.
Sources
- Lower of Cost or Market (LCM) Method: Why It's Used and Application - investopedia.com
- Lower of Cost or Market Rule | Financial Accounting - courses.lumenlearning.com
- Lower of Cost or Market Rule - Study.com - study.com
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