PGBP

8195 views 5 replies

hey guys .. can anyone explain me the rfeason for adding " OVER VALUATION OF  OPENING STOCK AND UNDER VALUATION CLOSING STOCK .." and vice versa ...

 

let say .. For e.g. opening stock Rs 10,00,000 is overvalued by 10% and Closing stock Rs 4,50,000 is undervalued by 10% ...

 

then we will add this : opening stock by Rs. 90909   (10,00,000 * 10/110)

                                and  Closing stock by Rs. 50,000 ( 4,50,000 * 10/90)

 

But why hv we added this .. can any1 explain .. please .. ?

Replies (5)

Dear Nishie,

First of all understand that Stoch has not been correctly valued & therefore adjustment has to be made for it's rectification..

Now, Opening Stock appears on the DEBIT SIDE of P&L A/c (i:e expenses side), so if this figure is overvalued that means the profit is less by that amount of overvaluation, & we have to add the amount of overvaluation to the figure of profit as a rectification..

                            P&LA/c

--------------------------------------------------------

Op Stock     1 Lac               Sales       50 Lacs

Expenses    25 Lacs         C/Stock      2 Lacs

Profit             26 Lacs

                      -------------                         ----------------

                     52 Lacs                                    52 Lacs

Now If I say that fifure of opening stock is excessive by Rs 0.50 Lacs, so what adjustment entry u would make -

26 Lacs +0.50 Lacs = 26.50 Lacs 

Because had opening Stock was correctly valued, the Profit would have been Rs. 26.50 Lacs

 

Just reverse is the case of Closing Stock

Dear Nishie...

Mr.Amir brother is correct...

Overvaluation of Op. stock amounts to reduction in profit which means you have to add back the excess amount inorder to find out the correct profit....

Undervaluation of Clo. stock also amounts to reduction in profit therefore we add back the difference amount undervalued to get the correct profit figure,....

I think you are clear now...

The goods may be received by the principal https://gas-stationsnearme.com/shell/ or sent to another job worker directly from the first job worker’s place of business.
 

i am very haply with using Mutual Fund Calculator for investmet purposes. it help me a lot on  Mutual Funds Calculator - Mutualfundcalculator  that is why i love it. website online here Mutual Funds Returns Calculator

--

Very informative discussion! I appreciate how clearly the concepts of PGBP and related tax implications were explained — it’s really helpful for professionals and students trying to understand business income under the Income Tax Act. The practical examples shared here make complex topics much easier to grasp. 

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
22 June 2026
Accountant

Global Image Technologies Private Limited

New Delhi

MBA

View Details
Company
25 June 2026
Accounts & Taxation Executive

Dindukurthy & Associates

Hyderabad

MBA

View Details
Company
24 June 2026
Chartered Accountant

CA Darshita Shah & Co

Nadiad

CA

View Details
Company
24 June 2026
Senior Account (VA Client Operations)

Karbon Business

Bengaluru

CA Inter

View Details
Company
24 June 2026
Chartered Accountant - GST & Direct Tax

APL

Mumbai

CA

View Details
Company
ARTICLESHIP 27 June 2026
CA Articled Trainee And Paid Assistant

SKAA & Associates

New Delhi

CA Inter

View Details
Company
09 June 2026
Accounts Associate

S Madan and CO

New Delhi

Graduate (Any)

View Details
Company
ARTICLESHIP 28 June 2026
Article Assistant

Sharma Chetan And Company

Gurgaon

CA Inter

View Details