Closing Stock Adjustment in Final Accounts
Arjun EP
Adjustments given below trial balance must be adjusted for final account.
Adjustment entry means not adjusted while preparing trial balance.
It is also known additional information.
Almost all the adjustment entry effects dual aspect.
One is debit and other is credit.
There are a number of adjustments to be made while finalizing the financial statements.
But our discussion will be limited to the following adjustments (limited by the curriculum):
MAJOR ADJUSTMENTS:
|
Closing stock Outstanding expenses Prepaid expenses Accrued revenue or income Unearned or prepaid revenue Depreciation on assets Appreciation on assets Written off or amortized Purchase or sale of fixed assets Bad debts, provision and discount Bad debts recovered |
Goods loss by fire and insurance claim Goods loss by fire and insurance claim Goods distribute as free sample Manager’s commission Bonus or pension to employees Create reserve or fund Goods sold on sale or return basis Hidden adjustment: (a) Interest on loan or debenture (b) Interest on investment (c) Monthly rent and salary |
Closing stock
Stock is also known as inventory and merchandise.
Every organization wants to sell maximum or entire purchase goods but it is not possible.
In every accounting year, there remain some unsold goods.
These unsold goods are called closing stock.
It valued at cost value or market value which is less in cost.
According to question, there may be closing stock of finished goods, work in progress and raw materials.
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =
ADJUSTMENT: 1
Extracted data is:
Closing stock has cost value $/₹/Rs 250,000 and market value Rs 230,000.
Required: Show effect on final accounts
Journal Entry
|
Date |
Particulars |
|
LF |
Amount |
Amount |
|
|
Closing stock account To Trading account (Being- closing stock recorded) |
Dr
|
|
230,000 |
230,000 |
Trading Account
|
Particulars |
Amount |
Particulars |
Amount |
|
|
|
By Closing stock |
230,000
|
Balance Sheet
|
Liabilities |
Amount |
Assets |
Amount |
|
|
|
Current assets: Closing stock
|
230,000 |
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