What is the formula for calculating Net Realisable Value?

The formula for calculating Net Realisable Value (NRV) is indeed accurate as Market Value - Selling Costs. NRV represents the estimated selling price of an asset in the ordinary course of business, less the estimated costs of completion and the costs necessary to make the sale.

Market Value reflects what the asset can be sold for in the current market, while Selling Costs are the expenses associated with the sale of that asset, which can include things like commissions or shipping fees. By subtracting these selling costs from the market value, you arrive at the net realizable value, which provides a clearer picture of the actual profit that can be generated from selling the asset.

This formula is fundamental in accounting because it helps in valuing inventory and determining how much should be reported on the balance sheet. It highlights the principle of conservatism in accounting, ensuring that assets are not overstated on financial statements.