Ronit (Article) (73 Points)
19 February 2011
@ CA. $ahar$h @
(Student)
(338 Points)
Replied 27 February 2011
Hi ronit,
buddy there is no need to pass any entry.you know we never pass the entry for closing stock.Its just a figure which is entered once on credit side of trading and shown as asset in balance sheet (i.e debited as shown as asset). Now as we dont pass any entry for the same we can simply quote the figure. There wont be any revaluation or anything.
If you still have some problem then please personel message me.
Hari Wadhwa
(CA in Practice)
(485 Points)
Replied 21 October 2011
Dear Ronit/Saharsh
Understanding Opening & Closing entries in the books; -
First thing is that "Valuation of Closing Stock" & "Recording of Closing Stock in the books" both are different things.
For each additional piece of information that we intend to derive from the books of accounts, we create and use an additional ledger account. Thus, to derive the information relating to Closing Stock we maintain a real account by name "Closing Stock a/c".
The "Closing Stock a/c" gives the information relating to the value of the stock (as an asset) unsold at the end of the accounting period.
As the value of the closing stock is not available ready hand, it need to be computed at the end of the year & need to brought into the books at the lower of its cost & NRV.
Thus, we pass the following closing journal entry; -
Closing stock A/c Dr
To Trading A/c
Or
To Purchases A/c
Or
To Goods Consumed A/c
[For recording the value of Closing Stock in the books.]
NOTE:- It has already been mentioned that the Valuation of Closing stock is different from the Recording of Closing Stock in the books.
The journal entry for closing the books of accounts during an accounting period: -
|
Creditors a/c |
Dr |
– |
||
|
[For the balances in the ledger accounts carried forward to the next accounting period.] |
||||
Similarly, the opening entry is based on the opening balance sheet.
|
Cash a/c |
Dr |
– |
||
|
[For the opening balances in the various ledger accounts brought forward into the books of accounts from the previous accounting period.] |
||||
Where the closing stock is recorded by crediting its value to the Trading a/c
|
Entry |
Effect |
|
Dr. Closing Stock a/c |
(+) This value need to be shown in B/s as an asset |
Further understanding; -
Case 1:- Closing Stock appearing outside the Trial Balance: -
It is quite possible that the valuation of the closing stock might not be completed by the time of making of Trial balance, hence in that case closing stock computed/ valued later need to shown at the bottom of the trial balance as its attachment & a part of Trial balance. Thus, need to be shown to stock in the Trading A/c & in B/s manually.
Case 2:- Closing Stock appearing in the trial Balance: -
If the valuation of closing stock has been completed by the time of making of trial balance as at end of closing period, a closing entry for bringing the stock into books is passed & hence, this entry’s ledger also appears in the Trial Balance & we know that each item of the Trial balance goes to one place only, this closing stock appearing in Tb will be shown in the B/s only as it has already been routed to Trading A/c by passing a J entry.
CAclubindia
