Answer / filipdenx

A typing mistake was there in my first answer. Corrected answer is as follows:

Sales (that is credited in trading account) include the value of goods sold during the whole accounting year.
However, Purchases (that is debited in trading account) include 'only' the value of goods 'purchased in that accounting year'.
If we had an opening stock, we sell that stock also along with the purchases of the accounting year.

So as mentioned above, Sales (that is credited in trading account) include the value of goods sold that is purchased during the year + the opening stock we had.
So if we debit the purchases only we can't take the actual total expenses to account that is leading to the sales because we have sold the opening stock too.

So the actual total expenses behind the sales include purchases + opening stock. OR the actual cost of goods sold = purchases + opening stock (in this case).
Example:
Opening stock = 30000
Sales = 400000
Purchases = 170000
So sales of 400000 include not only purchases of 170000 but also the opening stock of 30000. Therefore, in trading account, sales is credited as it is the total revenue of the year. Purchases is debited as it an expense of goods sold in that year. In addition to this, opening stock is also debited for the reason stated in the above content.
This is done for finding the actual gross profit. If opening stock is not debited, gross profit will be overstated.
Here the gross profit without debiting opening stock is 400000 - (170000) = 230000
Actual gross profit after debiting opening stock is 400000 - (170000 + 30000) = 200000
Thus actual gross profit is derived thereby.

Answer / philip denz

Sales (that is credited in trading account) include the value of goods sold during the whole accounting year.
However, Purchases (that is debited in trading account) include 'only' the value of goods 'purchased in that accounting year'.
If we had an opening stock, we sell that stock also along with the purchases of the accounting year.

So as mentioned above, Sales (that is credited in trading account) include the value of goods sold that is purchased during the year + the opening stock we had.
So if we debit the purchases only we can't take the actual total expenses to account that is leading to the sales because we have sold the opening stock too.

So the actual total expenses behind the sales include purchases + closing stock. OR the actual cost of goods sold = purchases + opening stock (in this case).
Example:
Opening stock = 30000
Sales = 400000
Purchases = 170000
So sales of 400000 include not only purchases of 170000 but also the opening stock of 30000. Therefore, in trading account, sales is credited as it is the total revenue of the year. Purchases is debited as it an expense of goods sold in that year. In addition to this, opening stock is also debited for the reason stated in the above content.
This is done for finding the actual gross profit. If opening stock is not debited, gross profit will be overstated.
Here the gross profit without debiting opening stock is 400000 - (170000) = 230000
Actual gross profit after debiting opening stock is 400000 - (170000 + 30000) = 200000
Thus actual gross profit is derived thereby.

Answer / neha

As it is the closing balance of previous year in the credit
side hence for its settlement it posted in debit side of
trading account.

Answer / janvi

Creditors are liabilities of a b's so it is credited in journal like this opening balance is previous year closing balance so it is our liability that's why it is Dr. to trading account

Answer / charitha

because it is an opening balance.

Answer / anuj kumar

to know the consumed amount ... consumed = purchase + opening stock - closing stock

Answer / v s kumar

AS closing stock was in credit side in the previous year it
has to be postd on Dr. side of the of trading account


V S kumar

Answer / mandar

like debtors a/c always has debit balance, and credit a/c
always has credit balance....for their balance to be
existed, inventory a/c also always has credit balance(as
inventory can't go in negative). thus, to tally both sides
of the a/c, cl. stock. is written at credit side...and thus
opening balance is then written at debit side, as it is
carried forward.

Answer / sandeep

To get actual GP we have deduct opening stock and and
purchases for the sum of sales and cl stock.

difference between cash book and bank book?

18 Answers   Accounting, College School Exams Tests, IBM,

What is the difference between " Public Ltd." "Pvt Ltd." "Paternship Firm", "Properitorship Firm"? Give detail information of this?

3 Answers  

i have cleared c.s inter. for the purpose of training i want to know the companies who are providing training of c.s in punjab state.please help me in this.

2 Answers  

what is the procedure to start any company? who will fix this share value?how to go for pulic issue?

1 Answers   HSBC,

what is the meaning of CTT

2 Answers  

What is STP Reports

1 Answers   3i Infotech, Accel, CTS,

What is the percentage of DA to be cut from an employee salary ?

2 Answers   ITC Infotech,

The stock investment and opening stock of a firm are Rs.500 and Rs.1000 respectively. Calculate its closing stock.

1 Answers  

what are all the things to be checked while consolidation of project/site accounts?

2 Answers  

How can i make entry of tds on salary in tally

1 Answers   ABC,

what is by brs?

52 Answers   Accenture, Accounting, Air Force, Amazon, Capital IQ, Cognizant, FactSet Systems, Genpact, Reliance, Shiva Corporation, Shriram Bio Seed, Shriram General Insurance, Syntel, Thomson, Trimble Navigation, TTSL,

STATE & EXPLAIN THE IMPACT OF GLOBAL FINANCIAL CRIS ON CEMENT SECTOR IN INDIA:

0 Answers