In Trading and pL ac. we record expenses on debit side and income on credit side.
Goods should be treated as expenses only when we sell it.
Since opening stock is sold during the current year therefore it is treated as current year expense and therefore dr. to trading account.
Closing stock is the stock remain with us at the end of accounting year.
It is the part of stock purchased during the year and it may include of opening stock also.
We record full purchase in debit side of trading account, but full purchase amount is not our expense since all good purchased doesnt sold during the year. So instead of recording only that part of purchase which is sold during the year, we record full purchase and put stock remains with us in credit side of trading account.
Eg. Total Purchase = 10000
Closing Stock = 2000
So our expense will be Rs. 8000
It will be recorded in trading acvount on this mannee:
Dr. SIDE Purchase = 10000
Cr. Side Closing Stock= 2000
Net effect = 8000
