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Increase/decrease stock in trade/wip

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(Querist)
29 July 2011 In the financial statement, the figures of gross profit are derived by deducting the Income from Sales and services minus the costs of services. When the cost of services is arrived at the increase/decrease stock intrade is shown. the increase in stock in trade is deducted from the cost of sales. The logic behind this may please be explained.
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CMA Ramesh Krishnan

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CMA Ramesh Krishnan (Expert)
31 July 2011 Cost of sales includes the value of purchase of stock which in hand at the end of the year, so that is not actually the expenses untill the stock sold. so we are deducting from cost of sales
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