Calculation of closing Stock give example?
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Answer Posted / h.r. sreepada bhagi
Formula for closing stock :
For a Trading Company-
Opening Stock + Purchases - Cost of Goods Sold.
For a Manufacturing Company-
Opening Stock + Purchases-Cost of Goods issued for
production + Cost of Work In Process + Cost of Goods
Produced - Cost of Goods Sold.
What's mentioned by me above is only an example.
For Finalisation of Accounts Inventory should be valued at
Cost or Net realisable value, whichever is lower. For proper
valuation, each unit of stock should be multiplied by cost
or current market price whichever is lower. In case of
trading company, since what's purchased is sold in the same
form, stock valuation is not difficult. However in case of a
manufacturing company input materials can be valued at
landed cost, but Semi-Finished Goods of Work-in-Process and
Finished Products should be valued by adding reasonable
overhead attributable to the production of those products.
Accounting guidelines, provisions in Income tax Act & other
applicable laws as well as the company policy should be kept
in mind while taking the value of Stock in Final Accounts.
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