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Why the adjustment and closing entries of closing stocks shows debit of closing stock?
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Why the adjustment and closing entries of closing stocks shows debit o...
Because opening stock balance shown Dr. side on trial balance .and closing stock are reverse of opening stock.
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Why the adjustment and closing entries of closing stocks shows debit o...
Reason for Debiting Closing Stock in Adjustment and Closing Entries
- Accrual Basis of Accounting: In accounting, the principle of matching requires that expenses be matched with revenues in the period they are incurred. Closing stock represents inventory that has not been sold yet, and therefore its value needs to be carried forward to the next accounting period.
- Valuation of Assets: Closing stock is an asset that needs to be accurately valued on the balance sheet at the end of the accounting period. By debiting the closing stock account, we are increasing the value of this asset to reflect its true worth.
- Closing Entries: The purpose of closing entries is to reset the balances of temporary accounts to zero at the end of the accounting period. By debiting the closing stock account, we are ensuring that the value of inventory is properly accounted for in the next period.
- Income Statement Impact: Debiting the closing stock in adjustment and closing entries helps in accurately calculating cost of goods sold and gross profit on the income statement. This ensures that the financial statements present a true and fair view of the company's performance.
By following these accounting principles and practices, businesses are able to maintain accurate records and make informed decisions based on the financial information presented in their reports.
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Why the adjustment and closing entries of closing stocks shows debit of closing stock?
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Why the adjustment and closing entries of closing stocks shows debit of closing stock? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Why the adjustment and closing entries of closing stocks shows debit of closing stock? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Why the adjustment and closing entries of closing stocks shows debit of closing stock?.
Why the adjustment and closing entries of closing stocks shows debit of closing stock? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Why the adjustment and closing entries of closing stocks shows debit of closing stock? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Why the adjustment and closing entries of closing stocks shows debit of closing stock?.
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