Answer / ruben

Closing is stock is a Real Asset in true terms as it has a
value as on a particular date ( Stock concept of
accounting) and as such it is shown in the Asset side of
Balance Sheet.

The idea of Showing the same in the credit side of Trading
A/c is following the Matching Principle/Matching Concept of
Accounting as this has the effect of arriving appropriately
at the Cost of Sales.As the debit side incorporates Opening
stock + Purchases and the credit side has the Sales figure,
appropriate matching of REVENUES to COST INCURRED TO EARN
THAT REVENUE will not happen unless Closing Stock features
in the Credit side of the Trading Account

Answer / v.sreenivasulu

Trading account - containing of purchases, sales, stock
(opening + closing).

Main Principle :-

opening stock + purchases = sales + closing stock

if u not record closing stock on CR side of Trading A/C,
the effect is that whatever O/Stock and purchases are
converted into Sales.

Sales is an Revenue for the organisation - where as Closing
stock will be an Closing asset.

Answer / mohammed irfan khan

Thanks for your answers. but i want to know that closing
stock is nominal account when we consider in trading
account? and became real account in balance sheet asset
side? thanks in advance.

Answer / praveen gnaneshwar

It is primarily to evaluate the correct profit ONLY from sales, without considering other Administrative or Indirect cost.

Take an Example:
You had an opening balance of stock worth Rs 100. You purchased some more for Rs.50. You sold stock worth 100 for 200 rupees. Thus you made a profit of 100 rupees while you still have stock worth 50 rupees with you.

Debit/Purchases: (Open Bal. 100 + Purchases 50 )- Credit/Sales (Sales 200 + Clsng. Stock 50) = 100 Profit

If you dont take closing stock into account, then your profits would fall to only 50 rupees which is not correct.

Answer / anant singh

Question :-
Any other Similar items, we should take care of in similar
manner(Adjustments).
in other words: What are the common items we can Example/see
in Trading/P&L Account as well as in the Balance Sheet?

Answer / anant singh

Found Few :-
Depreciation, Bed Debts, Reserves/Provisions, OutStandings,
Prepaid/Unexpired Exp.s, Unearned/Advance Incomes, Accrued
Income, Accurals, PrePayments, CLOSING-STOCK, Interest.s,
Reserves/Provisions for Discount on Dr./Cr.s(but NOT
Discount), Deferred Revenue Exp.

PLZ...
Correct MY Concept. if i did some BLUNDER.

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