Books of Account and Statements for Closing Stock in Financial Accounting

In Manufacturing and Trading Businesses,purchases/inwards and sales/outwards of Raw Materials/Finished Products/Trading Goods are very common.

After purchase and sale of goods,when some goods are unsold at the end of last day of an Accounting period, that goods are treated/termed as Closing Stock for the Accounting period/year.

You must have to ascertain the Value of Closing Stock at the end of an Accounting Year/Financial Year.

You may ascertain the Closing Stock Value at the end of any day/period as per your need due to any other reason.

Where Books of Account for Inventory/Stock are maintained manually/pen and paper mode for large number of Stock Items/products,it is very difficult and more time consuming to calculate the Value of Closing Stock.

For large number of Stock items,digital/electronic/software mode of Stock record keeping is more comfortable/easy than manual mode.

Related Books of Account/Statements for Closing Stock in a Trading Business.

• Stock Register/Stock Book - Details of Closing Stock 

• Trading Account - Credit Side

• Balance Sheet - Assets Side under Current Assets

Meaning of Closing Stock with example

Closing stocks are the quantity and value of Raw Materials/Finished Products/Trading Goods available on the last day of an Accounting Period.

Let's discuss,how we have to maintain the records of Stock and use the recorded data  in different Statements/Accounts of Final Account.

In the Books of M/s.RS Food Products

For the Financial Year 2019-20(Accounting period from date 01/04/2019 to 31/03/2020)

Purchased 500 nos. of Mustard Oil 1ltr packet @ ₹120/- per unit. excluding GST@5%.

Sold 475 nos. of Mustard Oil 1ltr packet @ ₹135/- per unit. excluding GST@5%.

On date 01/04/2019 there are no stocks available.

For the above transactions,Opening Stock Quantity and Value of Mustard Oil 1ltr packet on date 01/04/2019 is nil/zero(0).

Closing Stock of Mustard Oil 1ltr packet as on date 31/03/2020

Quantity = 500 nos. - 475 nos. = 25 nos.

Value = ₹60000 - ₹57000(cost price of goods sold i.e 475 x ₹120/-) = ₹3000(25 nos.@₹120/- per unit)

For the Financial Year 2020-21(Accounting period from date 01/04/2020 to 31/03/2021)

Opening Stocks as on date 01/04/2020 are the Quantity and Value same as

Closing Stock of Mustard Oil 1ltr packet as on date 31/03/2020

i.e Opening Stock as on date 01/04/2020 should be taken

Quantity = 25 nos.(500 nos. - 475 nos.)

Value = ₹3000(25 nos.@₹120/- per unit)

Stock inward and outward during the year.

purchased Mustard Oil 1ltr packet 650 nos.@₹130/- per unit.

Sold Mustard Oil 1ltr packet 527 nos.@₹145/- per unit.

Closing Stock as on date 31/03/2021 = (Opening Stock + Purchases) - Sales

Quantity = (25 + 650) -  527 = 148 nos.

Value = 148 nos. x ₹130/- = ₹19240/-

Journal Entry for transferring Closing Stock Amount to Trading Account.

Place of Closing Stock in Trading Account 

Closing Stock amounts are taken/mentioned at the bottom of all the ledger Accounts of Credit side in a Trading Account.

Given below is a format and procedure,how Closing Stocks are mentioned/shown in a Trading Account.

Place of Closing Stock in Balance Sheet

Closing Stock amounts are shown/mentioned at the Assets side under Current Assets of a Balance Sheet.

Given below is a format and procedure,how Closing Stocks are mentioned/shown in a Balance Sheet.