Closing Stock At End of the Year

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This discussion clarifies the accounting treatment for closing stock at the end of the financial year. It explains two common methods: debiting the Closing Stock account to Purchases or to the Trading Account. Both methods are deemed correct, with the key takeaway being that closing stock increases assets and is adjusted against purchases due to the matching concept. Regardless of the method chosen, closing stock will appear on the debit side of the Trial Balance.

Jigar

Jigar (Querist)
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27 January 2024 Closing stock a/c...debited
To purchase account
or
Closing stock a/c...debited To trading account

1. WHICH ENTRIES IS CORRECT
2. DIFFERENT BETWEEN BOTH ENTRIES

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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28 January 2024 Closing Stock is debited as there is an increase in the asset. Purchase A/c is credited because of the Matching concept. After recording the adjustment entry, the closing stock is shown on the debit column of the Trial Balance. It is not shown in the Trading A/c as it is already adjusted against purchases

Jigar

Jigar (Querist)
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28 January 2024 Thank you
CA R SEETHARAMAN
But what if wo go for second entries .

.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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29 January 2024 No problem second option can also be chosen.

Jigar

Jigar (Querist)
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29 January 2024 Thank you once again but in this case will the closing stock can be shown on the debit column of the Trial Balance???

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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29 January 2024 Yes, closing stock is on debit side.