when does closing stock shown in trial balance?
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Answer Posted / binoy
The reason why closing stock is not taken into account in a
trial balance is because a trial balance is a balance of
all ledger account a given point in time.It records only
transactions which have a two way effect for EG:Purchases
where goods are bought against cash or credit and sales
where goods are sold against cash or credit..But closing
stock is not a transaction having a two way effect any
given point in time.It is only an indication of the goods
lying in the factory at the end of the year.It is therefore
showed below the trial balance and not in the trial
balance.However in order to derive at the exact gross
profit the closing stock is taken into consideration in the
trading account and also appears as an asset in the
balancesheet.In some case the closing stock appears as an
adjusted purchase account in the trial balance and in this
case it does not appear in the trading account but appears
only in the balance sheet.
The main reason is that we do not pass any entry for
consumption. hence we donot prepare any ledger account for
it.
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