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What is the type of principal for CLOSING STOCK. and why we
show closing stock two time that is once in trading account
and another time in assets. if closing stock is Real
account than what about showing in trading account as we
dont show real account type in trading account. thanks
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Answer Posted / ruben
Closing is stock is a Real Asset in true terms as it has a
value as on a particular date ( Stock concept of
accounting) and as such it is shown in the Asset side of
Balance Sheet.
The idea of Showing the same in the credit side of Trading
A/c is following the Matching Principle/Matching Concept of
Accounting as this has the effect of arriving appropriately
at the Cost of Sales.As the debit side incorporates Opening
stock + Purchases and the credit side has the Sales figure,
appropriate matching of REVENUES to COST INCURRED TO EARN
THAT REVENUE will not happen unless Closing Stock features
in the Credit side of the Trading Account
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