Sec 145 a

stock in the balance sheet is taken from the P/l account.

So if it contains the Input tax amount as well, your profit increases.

With increase in profit, capital account increases.

tallied?

Tax shall be availed on Consumption basis of Raw Material, so the balance sheet will be tallied

Source: https://www.indiantaxupdates.com/2013/01/09/section-145a-valuation-of-purchases-sales-and-inventory/

My problem is not Resolved

Take an example

P & L Account (exclusive method)

Opening stock         nil                                   Sales                   120,000

Purchase                 100,000                          stock                      20,000

GP                               40,000

Total                          140,000                                                       140,000

Input tax @ 10%       10,000                     GP                               40,000

VAT payable                 2,000                     Output tax @ 10%       12,000

NP                               40,000                        

Total                           52,000                                                           52,000

Balace sheet

Capital                110,000                            Cash                     132,000        

NP                         40,000                            Stock                        20,000

VAT payable           2,000

Total                   152,000                                                            152,000

P & L Account (inclusive method)

Opening stock         nil                                   Sales                   132,000

Purchase                 110,000                          stock                      22,000

GP                               44,000

Total                          154,000                                                       154,000

VAT on cost of

goods sold              ( 8,000)                            GP                        44,000

VAT on sales             12,000

NP                               40,000                        

Total                            44,000                                                          44,000

Balace sheet

Capital                110,000                            Cash                     132,000        

NP                         40,000                            Stock                        22,000

VAT payable           2,000

Total                   152,000                                                            154,000

Note.The second balance sheet is not tallied

As per guidance note of ICAI both the profit are equal(under both method)

But the stock value increased, but not increased any liability item

if any wrong with me,please help and correct me