why closing stock balance doesnt come in trial balance?
whats the correct reasoning? it gets set off or it is prepared afterwards. whats the correct one answer to it..
anand
(articled assistant)
(28 Points)
Replied 10 June 2010
hi
Trail balance includes opening stock , purchases and sales figures.
closing stock (in units) = opeing stock +purchases-sales.
closing stock is also shown in trail balance by way above indirect route.
The reason why closing stock is not taken into account in a
trial balance is because a trial balance is a balance of
all ledger account a given point in time.It records only
transactions which have a two way effect for EG:Purchases
where goods are bought against cash or credit and sales
where goods are sold against cash or credit..But closing
stock is not a transaction having a two way effect any
given point in time.It is only an indication of the goods
lying in the factory at the end of the year.It is therefore
showed below the trial balance and not in the trial
balance.However in order to derive at the exact gross
profit the closing stock is taken into consideration in the
trading account and also appears as an asset in the
balancesheet.
CAclubindia
