Inter departmental tranfer

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The entry of stock reserve ie stock reserve ac debit to opng stock why do we reverse the entry in the next accounting year and show the uneliminated profit in cr of general profit and loss . As per assumption that if opng stock goods are sold in this year then the unrealised profit of last year would have got earned in this year. Then again showing that unrealised profit on credit side of P/L account......won't it will increase our net profit transferable to balance sheet

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Stock reserve means stock has been shown at invoice value ( higher than the cost price ) .. opening stock showing at higher price will lead to lower profits …. To correct that situation .. stock reserve in respect of opening stock is credited to General profit and loss account ..


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