Why Closing stock is not part of a trail Balance???
Stock Lying in business at the end of the accounting period is called closing stock. It is valued at cost price or market price whichever is low. It is unsold or unused portion of the goods purchased. At the time of purchasing of goods, purchase account is debited and cash account is credited in case of cash purchases, or creditor account is credited in case of credit purchase. The amount of closing stock has already been entered with the purchase account. So closing account is not again included in Trial Balance. However, if the value of adjusted purchase account (purchase - closing stock) is given, the amount of closing stock will be shown in trial balance. In this case closing stock will be shown as asset in balance sheet.
There are two important cases when closing stock forms a part of Trial Balance:
(a) When purchase is adjusted (by deducting the value of closing stock from total purchases)
(b) When amount of gross profit if given with the other ledger balances.
sivaram
(Asst Mgr-Taxation)
(6918 Points)
Replied 07 November 2009
nice explanation Mr Deepak but
(b) When amount of gross profit if given with the other ledger balances.
This kind of instances i have not seen so far
CA Trinath Galla
(student)
(3130 Points)
Replied 07 November 2009
| Originally posted by :sivaram | ||
| " | nice explanation Mr Deepak but (b) When amount of gross profit if given with the other ledger balances. This kind of instances i have not seen so far |
" |
even i do...
Umesh V Naig
(Statutory Analyst)
(452 Points)
Replied 07 November 2009
The correct method of accounting is :
classify Purchases - Local
PUrchases - Interstate under Current assets -/ Closing stock a/c
Monthly value the closing balance of quantities and pass Journal entries as
Debit Consumption - Rawmaterial
Credit Purchases - Local / or Interstate
The balance shown in the Purchases / Local - interstate will reflect the closing stock in the trial balance.
Hope the procedure is correct, any comments on the same pl
akshay nahar
(none)
(22 Points)
Replied 23 November 2009
sir closing stock is valued at cost or market price which ever is low.so in this one which principle is followed ? is it realisation concept or conservatism?
Ansari
(ca final)
(444 Points)
Replied 24 November 2009
Mr. Deepak wud u like 2 explain (b) in detail.
| Originally posted by :Deep @ k Gupt/\ | ||
| " | Stock Lying in business at the end of the accounting period is called closing stock. It is valued at cost price or market price whichever is low. It is unsold or unused portion of the goods purchased. At the time of purchasing of goods, purchase account is debited and cash account is credited in case of cash purchases, or creditor account is credited in case of credit purchase. The amount of closing stock has already been entered with the purchase account. So closing account is not again included in Trial Balance. However, if the value of adjusted purchase account (purchase - closing stock) is given, the amount of closing stock will be shown in trial balance. In this case closing stock will be shown as asset in balance sheet. There are two important cases when closing stock forms a part of Trial Balance: (a) When purchase is adjusted (by deducting the value of closing stock from total purchases) (b) When amount of gross profit if given with the other ledger balances. |
" |
Nilay
(CA Training as Article)
(192 Points)
Replied 16 April 2010
Adjusted Purchase & COGS both are same?
Nilay
(CA Training as Article)
(192 Points)
Replied 16 April 2010
Please give me a Formula of Adjusted Purchase
CA KHAN AURANGZAIB
(ERP FINANCIAL CONSULTANT)
(85 Points)
Replied 17 April 2010
All answer given are true but we are facing problem when company want to know profit on daily basis or monthly basis.
For this purpose first we calculate our stock, thereafter make a profit and loss account with the effect of such closing stock.
However these scenario have been changes after in Standered ERP like SAP, Microsoft Dynamic navision because in such ERP System post different entry when you purchase stock like:-
At time of purchasing goods ERP Post:-
Inventory Account DR.
To Supplier
Because of that we can see inventory in our trial balance.
At the time of sale ERP postL:-
Cost of Goods sold DR.
To Inventory Account
With the effect of these entry you can find profit and loss account at any time.
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