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Inventory adjustment

c.s.karthik (articles) (53 Points)

24 March 2014

Hello All,

A basic doubt has arisen to me. When we purchase and sale goods then the Dr is Purchases A/c and Cr is Sales A/c respectively. and in both the cases inventory has been received and dispatched respectively.. So in this process how does inventory is being hit ! i mean where is the entry being passed to hit the inventory A/c ? How is the inventory account being reflected in both cases !! Please clarify !...

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12 Replies

Vardan Singh Sengar (Accounts Manager in Private Company) (433 Points)
Replied 24 March 2014

PLS CLARIFY IN DETAIL.

c.s.karthik (articles) (53 Points)
Replied 24 March 2014

I Mean when we purchase we debit Purchases A/c and

in sales we credit Sales A/c But we do not pass any entry to the Stock A/c then how come in the trading A/c and Balance Sheet stock appears ??? We do not pass any entry in stock A/c...

Vardan Singh Sengar (Accounts Manager in Private Company) (433 Points)
Replied 24 March 2014

IF YOU ARE MAKING JOURNAL VOUCHER OF SALES & PURCHASES THEN IT WON'T EFFECT YOUR STOCK.

c.s.karthik (articles) (53 Points)
Replied 25 March 2014

Thats what i am asking sir , how does then closing stock gets reflected ?? when i dont pass any entry in inventory a/c ...

Vardan Singh Sengar (Accounts Manager in Private Company) (433 Points)
Replied 25 March 2014

As far As i am concerned with the accounting. The Accounting for sales & purchases should be done in purchase books & sales books rather then journal book. just Customise your basic entry...simple

If you are in a service sector thn its ok to enter the vouchers in j.v but in order to effect stock whether trading or mfg firm. You are required to make changes in the basic entry.

c.s.karthik (articles) (53 Points)
Replied 25 March 2014

I am not asking whether it should be passed in general journal or purchase/sales journal ,,,

just explaing me with the help of passing journal entries ...

Vardan Singh Sengar (Accounts Manager in Private Company) (433 Points)
Replied 25 March 2014

IT WILL NOT COME UNDER JOURNAL ENTRY.. :-)

Shivani (Learner) (1881 Points)
Replied 04 April 2014

Dear Karthik

Purchase is our expense

Sale is our income

if u r making accounts with inventory in tally, then u manually feed all the opening stock a company has, the closing stock tally will calculate automatically considering openign stock and any purchase and sale u have made during the year.

in trading we consider the total of sales and substract the cost of goods sold from sale to ascertain gross profit.

i hope this clears something.

shivani

Vardan Singh Sengar (Accounts Manager in Private Company) (433 Points)
Replied 04 April 2014

Agreed WIth shivani.

purchase/stock a/c dr

to xyz party

(journal entry)

Sathya Sankeerth K N (Chartered Accountant) (429 Points)
Replied 04 April 2014

Dear Karthik, please note that the accounts purchase and sale are in disguise of stock. Infact they are the accounts which affect you income, expense as well as the stock level.

If you are using Tally to make entries, then few configuration will help you enter stock in and stock out details when you want enter purchases. It can be so designed that the nature of voucher namely journal or purchase or sale makes no difference. Once you have to pass a purchase entry, it will manadatorily ask you what are the nature of stocks and which cateogory to be effected, accordingly you can pass an entry. Same follows in case of sales, if you have to pass sales entry it will ask you which stock is moving out. Balance amount of stock is well known which is shown in P&L and Balance Sheet.

If books are maintained manually, then you have purchase book, sales book and stock book to help you to manipulate stock levels.

In case of ERP, SAP and Oracle there are separate modules to monitor these requirements.

I hope your doubt is clarfied.

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