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.

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