Closing Stock Double Entry
Closing stock, or ending inventory, refers to the value of goods that remain unsold at the end of an accounting period. The closing stock is determined through a physical count or valuation method and is recorded in the financial statements. Here's how the double entry for closing stock is recorded:
Scenario: Recording Closing Stock
Assume the closing stock for the period is valued at ₹100,000.
Journal Entry
- Adjusting Entry (to bring closing stock into the accounts):
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Closing Stock A/c | 100,000 | |
| To Trading A/c | 100,000 | |
| (Being closing stock brought into the accounts) |
- Balancing Entry (to carry forward the closing stock to the balance sheet):
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Inventory (Balance Sheet) A/c | 100,000 | |
| To Closing Stock A/c | 100,000 | |
| (Being closing stock carried forward to the next period) |
Explanation:
Adjusting Entry:
- Debit Closing Stock A/c: Recognizes the value of the closing stock.
- Credit Trading A/c: Reflects the closing stock in the trading account.
Balancing Entry:
- Debit Inventory (Balance Sheet) A/c: Transfers the closing stock to the balance sheet as an asset.
- Credit Closing Stock A/c: Clears the closing stock account.
