Obsolete inventory is inventory at the end of a product’s life that must either be written off or written off from the company’s books.
Obsolete inventory is written off by debiting an expense and crediting an asset contra account, such as a provision for obsolete inventory.
The opposite asset account is compared with the full inventory asset account to obtain the current market value or book value.
When obsolete inventory is discarded, both the corresponding amount in the inventory asset account and the opposite asset account are deleted in the disposal journal entry.