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Adjusting for Closing Stock Video Lecture | Accountancy Class 11 - Commerce

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FAQs on Adjusting for Closing Stock Video Lecture - Accountancy Class 11 - Commerce

1. What is closing stock in commerce?
Ans. Closing stock in commerce refers to the value of unsold goods at the end of an accounting period. It represents the inventory that a business still holds and has not yet sold.
2. How is closing stock calculated in commerce?
Ans. Closing stock is typically calculated by taking the total value of inventory at the beginning of the accounting period, adding purchases made during the period, and then subtracting the value of goods sold during the period.
3. Why is it important to adjust for closing stock in commerce?
Ans. Adjusting for closing stock in commerce is important because it ensures that the financial statements accurately reflect the true value of inventory on hand. This adjustment helps in determining the cost of goods sold and the overall profitability of the business.
4. What are the different methods used to value closing stock in commerce?
Ans. Common methods used to value closing stock in commerce include the FIFO (First In, First Out), LIFO (Last In, First Out), and weighted average cost methods. Each method has its own advantages and is used based on the specific needs of the business.
5. How does the valuation of closing stock impact a company's financial statements?
Ans. The valuation of closing stock directly affects a company's balance sheet and income statement. A higher valuation of closing stock will result in higher assets on the balance sheet, while a lower valuation will impact the cost of goods sold and ultimately the profitability of the business.
82 videos|105 docs|42 tests

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