why closing stock shown in trading account .whenever its current assets.or its also shown in balance sheet .why
Dear Student,
In Trading Account, we record "opening inventory" , "Purchases" and "Direct Expenses" on the Debit side which collectively represents the COST incurred to manufacture the goods.
While the credit side records "Sales" and "Closing Stock".
If all the manufactured goods are not sold, the unsold goods is termed as "Closing Stock".
The total of Debit side represents COST and sales represents REVENUE.
Cost of sales must be matched up with current year’s revenue and as the inventory at the end of the period has not been sold and thus should not be accounted against sales revenue, therefore it must be deducted from cost of sales. That is the reason why we deduct closing stock or record it on the credit side of Trading Account.
For further doubts, do get back to us.
Keep studying and keep posting!!
In Trading Account, we record "opening inventory" , "Purchases" and "Direct Expenses" on the Debit side which collectively represents the COST incurred to manufacture the goods.
While the credit side records "Sales" and "Closing Stock".
If all the manufactured goods are not sold, the unsold goods is termed as "Closing Stock".
The total of Debit side represents COST and sales represents REVENUE.
Cost of sales must be matched up with current year’s revenue and as the inventory at the end of the period has not been sold and thus should not be accounted against sales revenue, therefore it must be deducted from cost of sales. That is the reason why we deduct closing stock or record it on the credit side of Trading Account.
For further doubts, do get back to us.
Keep studying and keep posting!!