Closing Stock not shown in Trial Balance? - cost of goods sold

Abhay Goyal Started The Discussion:

Dear All,

Trial Balance contains the All Closing Balances of Profit and Loss A/c and Balance Sheet as on date.

However the balance of Closing Stock is not taken in Trial Balance and only Opening Balance exists.

Can you explain the reason for this?

Thanking you in advance

Abhay Goyal

harshwason -  Member Since: Sep 2009

This depend on manner in which accounting is designed for the Organisation.

In the present case ur discussing in the Trial we have Opeaning Stock & whenever we are purchasing the goods we are booking the same under purchases. However in order to find out profitability we require Cost of Goods Sold which is Opeaning Stock+Purchases-Closing Stock. Thus under this method at the end of the year closing stock is checked & valuated to find out COGS, i.e. Closing Stock is derived figure & that is why in accounting books you have seen closing stock is given in notes.

This closing Stock is thus used at two place One in P&L & one in B/S to ensure double Entry & correct accounting.

nsubramani -  Member Since: Feb 2010
generally clsoing stock is an item of adjustment and lies outside Trial balance.

Still u can choose to bring the effect of closing by showing adjusted purchase or cost of consumption.

whatever be the method be consistent in understanding and disclosure.

N Subramani - Services


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