If closing stock was not adjusted against Purchase at the end of accounting period,
where the closing stock is shown in Trial Balance? Why?
Answers
If closing stock appeared in Trial balance it means the purchases has been reduced to the extent of stock amount at the end of the period. The accounting treatment will beclosing stock to be shown in Balance sheet under current assets and it should not be credited to Trading a/c.
The closing stock represents the cost of unsold goods lying in the stores at the end of the accounting period. The closing stock of the year becomes the opening stock of the next year and is reflected in the trial balance of the next year. Sometimes, the opening and closing stock are adjusted through purchases account. In this regard, the entry recorded is as follows:
Closing Stock A/c debit
To Purchases A/c credit
This entry reduces the amount in the purchases account and is also known as adjusted purchases which is shown on the debit side of the trading and profit and loss account. Another important point is when the opening and closing stocks are adjusted through purchases, the trial balance does not show any opening stock. Instead, the closing stock appears in the trial balance and so also the adjusted purchases.