Lower of Cost or Market (LCM) journal entries refer to the practice of recording a lower value for an item that is either overstocked or has decreased in market value. This accounting principle is used to ensure the accuracy and correctness of inventory values on a company’s financial statements. By valuing inventory at its fair market value, companies are able to remain up-to-date with current market conditions and accurately report their financial information. LCM journal entries can help prevent losses due to obsolete inventory or impairments in value. Companies must carefully monitor the values of their inventory to take advantage of this useful accounting process.