How to show closing stock in Trial Balance.

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How to add the closing stock into the above trial balance

asked Jun 2, 2016 in Trial Balance, Profit & Loss Account and Balance Sheet by Shaws (19 points) 1,694 views

1 Answer

+1 vote
If you wish to show Closing Stock in Trial Balance, pass the following journal entry:

1, Purchases A/c            Dr. 5980959.04

      To Opening Stock A/c                              5950959.04                  

2. Stock (closing) A/c     Dr.  700,000.00

   To Purchase A/c                                            700,000.00

After passing the above two journal entries, when you will prepare new Trial Balance, Purchase A/c will appear on debit side at 1100516.82 (5950959.04+2119557.78-7000000).  Closing stock will appear on the debit side of Trial Balance.  Since opening stock account has been closed into Purchase A/c through first journal entry, it will not appear in the Trial Balance.  After this when you will prepare trading account, credit side will have only Sales A/c, closing stock will not be shown there.  Similarly on the Debit side of Trading A/c Purchases A/c will appear but not opening stock.  Closing stock will only be shown in the Balance Sheet.

In the above question purchases are less than closing stock.  If we just make the second journal entry, we get negative balance in the Purchase A/c, which is not possible, hence we had to pass the first journal entry so that we get a positive balance in Purchase A/c.  In normal circumstances when closing stock is less than purchases, we need not pass first entry.  In that case opening stock as well as closing stock  will appear in the Trial Balance.  In Trading A/c Opening Stock will be shown on debit side but Closing Stock will not appear on the credit side, though it will appear in the Balance Sheet.

The logic for the above entry can be understood from the link given below:
answered Jun 3, 2016 by jbsclasses (3,971 points)
Dear Sir,

Can you show the trial after adjusting closing stock


In case of any doubt, you may discuss further.

Dear Sir,

How come the Balansheet Liability shows purchase a/c. purchase should be shown only in the trading debit side. isn't it Sir?
Corrected.  That was because of copy and paste of Trading A/c.
Thank you sir