Why closing stock shown in cr side of trading account
This query is : Resolved
07 April 2016
Why closing stock is shown in the credit side of Trading Account, being an asset.
07 April 2016
Closing stock is the amount of inventory that a business still has on hand at the end of a Financial Year. This includes raw materials, work-in-process, and finished goods inventory and also it is a current assets shown in Balance Sheet
07 April 2016
Full purchase value is shown under debit side. As some purchases will be still in the stock, showing full purchase as expenses will affect the true profit so to neutralize this effect only stock is shown in credit side.
07 April 2016
See, If you purchase 1000 unit + you have previous stock of 100 unit so total is 1100 unit and if you sell 900 unit in a whole year then 200 unit is your closing stock or if your purchase is 1000 unit you sell 800 unit in a year then 200 unit is in your stock which you will sell in next year.
So if you don't take 200 unit as closing stock which is a part of purchase and to neutralize 200 unit effect you have to show 200 unit stock as closing stock in trading account.
So if you don't take 200 unit as closing stock which is a part of purchase and to neutralize 200 unit effect you have to show 200 unit stock as closing stock in trading account.
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