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trading account

Krishna Teja (Chartered Accountant) (1007 Points)

11 June 2010

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

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2 Replies

Venkateswara Rao Sapare (Accountant) (1500 Points)
Replied 11 June 2010

Dear Friend,

Stock is classified as follows

Opening Stock
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.

JITENDRA KUMAR DHINGRA (Executive) (93 Points)
Replied 12 June 2010

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