Confusion in opening and closing stock?

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Rehan khan

Student

4 Points Joined July 2020

What are opening stock and closing stock? I know their meanings but are they ledger accounts like cash?or are they name of entries in stock account?

If they are accounts, what are other entries in that account or are they single entry accounts? And what are their types....asset or expense?

Replies (2)

See Opening stock and closing stock both terms are used to calculate gross profit of business.
Opening stock means in begining of year how much amount and no. of item are available and cl. stock means remain left end of year .
As person for there business purchase its units which he want to sale then whatever unit remaining left at end of year are consider as closing stock. Closing stock is our Assets soo reflected in Balance sheet. and this Cl. stock will be Op. stock for next year.

Rajarajan. K.S

Employee

44 Points Joined May 2015

Hey Hii.. Your question I like it..!!

Ans to your question: Consider you are a jwellery shop owner. You would have bought 10kg of gold worth Rs 10L (This is your opening stock).

You made sales worth of Rs. 12L (8kg sold) and left with 2kg as closing stock.

Now you can say that you made 2L profit at a go. But here comes Valuation of closing stock. If at the close of accounts Gold price dips(market value) then you will end up with your profit reduced.

Layman may say you made profit of 2L. even if Gold rate increase going with prudence we will account for cost price or market Which ever is lower. Hence closing stock valuation is more Important to arrive profit.