Regarding expense entries in a p/l account

Hi ,in a Profit and Loss account statement ,we list the revenues and the expenses .While we list (among others) the sale of products and services in the revenues ,we list the Cost of Material Consumed and the Changes in Inventories of Finished Goods,WIP,& Scrap in the expenses .I have a doubt as to why are these 2 categories listed in the first place .

  1. As per the matching principle of Accounting, we take into account the expenses that correspond to revenues .Material in WIP & Scrap does not coresspond to any item 'sold' .So why is it included ?
  2. Why do we consider change in inventories of these goods ? If the change (Opening Stock+Purchases-Closing Stock) is negative ,it means some stock is sold .That is included in the Sale of products & Services ,so why included it 'twice' ,in the expense section too ?

Any help will be appreciated .Thanks!  

Replies (1)

Raw material purchased either on cash or credit has value. A price has been paid on it. And any change in the quantity of raw material will also affect the value of the material, and therefore it is necessary to show in profit & loss. Same with work in progress and finished goods. 

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