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trading account


Krishna Teja (Chartered Accountant)     11 June 2010

Krishna Teja
Chartered Accountant 
 112 likes  1007 points

| My Other Post

hi i am teja. one of my friend asked me a question i couldnt answer appropriately plz help me 4 saying him

his question is

generally nominal accounts are posted to trading and p&l account  and real & nominal accounts in balance sheet

but why will we post the stock(goods i.e opening stock, purchases, closing stock) account to trading account though it is REAL account

i said me it is the normal practice is it right

avater

Venkateswara Rao Sapare (Accountant)     11 June 2010

Venkateswara Rao Sapare
Accountant 
 49 likes  1500 points

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Dear Friend,

Stock is classified as follows  

  1.  Opening Stock 
  2. Closing Stock.

Here, "Closing Stock" refers to 

  • Closing Finished goods  / stock
  • Stock in process
  • Stock in semi finished stage 

Now, let us focus our attention only on "CLOSING STOCK".

This "CLOSING STOCK" is an item, which carries unique commercial feature, i.e. it never factors in the "TRAIL BALANCE"., which enables it to reflect twice in the Financial statements., first in (1) Balance Sheet and second in (2) the Statement of Profit & Loss.

You all may be sure that there is no such item like "CLOSING STOCK", with similar features.

avater

JITENDRA KUMAR DHINGRA (Executive)     12 June 2010

JITENDRA KUMAR DHINGRA
Executive 
 5 likes  93 points

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hi friends

basically when we entered the amount of closing Stock,OPening Stock together with Purchases during the year. We tries to find out the stock consumption during the year that should be charged from the trading account.Due to the reason of presentation we mention separately the amoun of Cl. STock/Opening Stock/Purchases......................Stock is Real account........................Stock consumption is Nominal account...............

Regards

Jitendra


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