08-14-2010, 06:58 AM
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by alpha</i>
<br />Hi,
I have a query.
Why closing stock is considered in both Profit & Loss A/C and balance sheet.
Regards.
Bipin
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Yaara basically firstly u need to understand that Stock is our Current asset therefore it is a part of balance sheet. Secondly as far as PnL is concerned the formula that we use to calculate the cost of goods sold is such that if we don't subtract closing stock from the total of purchases and opening inventory than it will not be cost of goods sold it will be cost of goods AVAILABLE FOR SALE. therefore we need to subtract closing stock from total of purchases and opening inventory to make sure that the COGS doesn't incorporate the cost of goods which are still held and have not been sold.
<br />Hi,
I have a query.
Why closing stock is considered in both Profit & Loss A/C and balance sheet.
Regards.
Bipin
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Yaara basically firstly u need to understand that Stock is our Current asset therefore it is a part of balance sheet. Secondly as far as PnL is concerned the formula that we use to calculate the cost of goods sold is such that if we don't subtract closing stock from the total of purchases and opening inventory than it will not be cost of goods sold it will be cost of goods AVAILABLE FOR SALE. therefore we need to subtract closing stock from total of purchases and opening inventory to make sure that the COGS doesn't incorporate the cost of goods which are still held and have not been sold.
