Stock Accounting Basics for Businesses

1. 09 – Paid to Mr. A Rs. 25,000 through cheque

2. 10 – Received cash from Mr. B. Rs. 75,000.

3. 11 – Salaries accrued Rs. 5,000.

4. 12 – Expenses accrued Rs. 15,000.

5. Trial Balance

7. Items purchased for own use of the business are charged as expense, e.g. tube lights, bulbs, stationery etc. • Items purchased for the purpose of resale are treated as Purchases.

8. Stock • Stock is the quantity of unutilized or unsold goods lying with the organization.

9. Types of Stock • In case of Trading Concern (an organization that does not manufacture goods and but resells the purchased goods.) • Stock in Trade (Finished goods) • In case of Manufacturing Concern (an organization that purchases material and converts into a finished product by putting it through a process). • Raw Material Stock • Work in Process • Finished Goods Stock

10. Stock Account • Stock Account is Debited with the Value of the Goods Purchased. • Stock account is Credited with the Purchase Price of the Goods Sold / Issued for Production. • Stock Account shows the cost / purchase value of unsold goods.

11. Purchase of Stock • Credit Cash Account OR Supplier / Creditor Account • Debit Stock Account

12. Payment to Creditors • DebitSupplier / Creditor Account • Credit Cash Account

13. Sale of Goods • DebitCost of Goods Sold • Credit Stock Account

14. + Opening Stock + Purchases – Value / Cost of Goods Sold = Closing Stock

15. Cost of Goods Sold • Trading Concern • Purchase Price of the Goods Sold • Manufacturing Concern • + Cost of Raw Material Consumed • + Other Manufacturing Costs e.g. salaries of labour, cost • of machinery

16. Stock & Cost of Goods Sold In Manufacturing Conc. Raw Material Stock Other Costs Accounts Work in Process Account Finished Goods Account Cost of Goods Sold Account