Closing stock in cash system

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SHILPA MAHAJAN (Querist)
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16 December 2011 Please clearify whether we have to recognise closing stock in a concern following cash system of accounting?

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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16 December 2011 Without accounting for the closing stock how you will recognise profit ?

Suppose you have purchased (all paid) goods of Rs 500000/-, if you do not show closing stock, your Trading A/c will show loss of
Rs 5.00 lacs, whereas the assessee is having no Gross Loss.

Hence it is required to be shown.

SHILPA MAHAJAN

SHILPA MAHAJAN (Querist)
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17 December 2011 Sir but suppose if all purchases(credit) of Rs 500000/- and out of these purchases stock of Rs 400000/- is sold for Rs 450000/-(cash). Then trading a/c will show a profit of Rs 450000/- and in this case if we consider closing stock also, the gross profit will give an unreliable figure.

In that case what should be done?

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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18 December 2011 Due to the same reasons normally mercantile system of accounting is followed in case of a business entity.
.
Cash System is preferred by Professionals only.

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