Value of unsold goods at the end of an accounting period is recorded as closing stock. Stock is the sum total of all the inventory of products or materials that a company holds for sale or production. The valuation of closing stock is reckoned on the base of its cost price or the realisable value, whichever is lower.
Adjustment:
A. If Closing Stock is given outside the trial balance: Usually, closing stock is given outside the trial balance. In such case, two entries are passed:
- In the Cr. side of the Trading Account.
- In the Assets side of the Balance Sheet.
B. If Closing Stock is given inside the trial balance: If Closing Stock is given in the trial balance, then it will be recorded only once on the Assets side of the Balance Sheet.
Illustration:
The Trial Balance of Ms. Samriti for the year ended March 31 2023, appears as follows:
The following adjustments were noted on that date:
1. Amount of Closing stock on 31st March 2022 was ₹15,000.
2. Outstanding wages amounting to ₹500.
3. Salary paid in advance amounting to ₹5,000.
4. Commission amounting to ₹1,500 is still to be received.
5. Rent received in advance amounts to ₹3,000.
Prepare Trading and Profit and Loss A/c and balance sheet after taking the following adjustments into consideration.
Solution:
