Excess stock and cash adjustment procedure

This discussion addresses the accounting procedure for a trader with excess stock and cash. The trader has stock discrepancies of Rs. 3 lacs (Rs. 25 lacs book vs. Rs. 22 lacs trade) and cash differences of Rs. 1 lac (Rs. 5 lacs book vs. Rs. 4 lacs trade). Options for adjustment include treating the excess stock as a cash sale of Rs. 3 lacs and accounting for the cash difference via drawings.