P&L,Balance Sheet and Trial balance - Period 2

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P&L,Balance Sheet and Trial balance - Period 1

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Points - for resolving the assignment

Please go to this link to find out which account goes where.

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Please note that closing stock is not written in trial balance. See the answer below from WikiAnswers.

Question: Why is closing stock not written in the trial balance but always written below the trial balance?

Ans :

closing stock in trial balance

The reason why closing stock is not taken into account in a trial balance is because a trial balance is a balance of all ledger account a given point in time.It records only transactions which have a two way effect for EG:Purchases where goods are bought against cash or credit and sales where goods are sold against cash or credit..But closing stock is not a transaction having a two way effect any given point in time.It is only an indication of the goods lying in the factory at the end of the year.It is therefore showed below the trial balance and not in the trial balance.However in order to derive at the exact gross profit the closing stock is taken into consideration in the trading account and also appears as an asset in the balancesheet.In some case the closing stock appears as an adjusted purchase account in the trial balance and in this case it does not appear in the trading account but appears only in the balance sheet.

In our assignment we will have to include the closing stock as an asset in the balance sheet and reduce the cost of the closing stock from the total cost of goods(timber) sold.

Debits and Credits

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