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

Records - related to Closing Stock

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)

Closing Stock
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/-

Closing Stock
Journal Entry for transferring Closing Stock Amount to Trading Account.

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 Trading Account

Closing Stock - Credit side of 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.

Closing Stock - Assets Side under Current Assets of Balance Sheet
Place of Closing Stock in Balance Sheet

Location: Cuttack, Odisha, India

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