Reason behind not appearance of closing stock in trial balance

This query is : Resolved

Share Report Follow Query Ask a Query

deep mahintamani

deep mahintamani (Querist)
Follow

07 October 2013 why closing stock don't appear in trial balance?

Sanket

Sanket (Expert)
Follow

07 October 2013 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.In
some case the closing stock appears
as an adjusted purchase account in
the trial balance and in this case it
does not appear in the trading
account but appears only in the
balance sheet.
The main reason is that we do not
pass any entry for consumption.
hence we donot prepare any ledger
account for it.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now