The pharmaceutical industry plays a crucial role in the healthcare sector by producing and distributing drugs that contribute to the well-being and treatment of patients. As pharmaceutical companies deal with various types of drugs and medicines, proper accounting treatment of drug inventory becomes essential. Accurate accounting ensures that the financial statements reflect the true value of inventory and assists in making informed business decisions. The accounting treatment of drug inventory involves several aspects that need careful consideration. These include the valuation of inventory, recognition criteria, measurement methods, and potential write-downs or impairments. Each of these aspects has implications for financial reporting and affects the overall financial health of the pharmaceutical company. Valuation is a fundamental aspect of drug inventory accounting. The valuation of inventory is typically based on the lower of cost or net realizable value (NRV). Cost includes all expenditures incurred to bring the drugs to their current location and condition. This encompasses purchase costs, transportation costs, and direct production costs. On the other hand, NRV represents the estimated selling price of the drugs minus any further costs to be incurred.