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Why does 'Closing Stock' not shown in the Trial Balance? Video Lecture | Advanced Corporate Accounting - B Com
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FAQs on Why does 'Closing Stock' not shown in the Trial Balance? Video Lecture - Advanced Corporate Accounting - B Com
| 1. Why is 'Closing Stock' not shown in the Trial Balance? |  |
Ans. Closing Stock is not shown in the Trial Balance because it is considered as part of the financial statements, specifically the Income Statement, where it is used to calculate the Cost of Goods Sold.
| 2. Is Closing Stock important for financial analysis? | |
Ans. Yes, Closing Stock is important for financial analysis as it represents the value of unsold goods at the end of an accounting period, which can impact a company's profitability and financial position.
| 3. How is Closing Stock recorded in the accounting books? | |
Ans. Closing Stock is recorded as an asset on the Balance Sheet at its cost or net realizable value, whichever is lower. It is usually valued using methods like FIFO, LIFO, or weighted average cost.
| 4. Can Closing Stock be adjusted in the Trial Balance? | |
Ans. No, Closing Stock cannot be adjusted in the Trial Balance as it is a closing inventory figure that is carried forward to the next accounting period. Any adjustments related to Closing Stock would be reflected in the financial statements.
| 5. How does Closing Stock affect the calculation of gross profit? | |
Ans. Closing Stock is subtracted from the cost of goods available for sale to calculate the Cost of Goods Sold, which is then deducted from sales to determine gross profit. Therefore, the value of Closing Stock directly impacts the gross profit margin of a business.
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Dec 23, 2024 Last updated |
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