Loading....
Coupon Accepted Successfully!

 

Important Equations Related to Final Accounts

  • Gross profit = Sales - Cost of goods sold (COGS)
  • COGS = Opening stock + Purchases + All conversions costs + Direct expenses - Closing stock
  • Direct expenses = Freight inward, Taxes, Wages for loading and unloading while receiving goods, etc
  • Do not consider freight outward as duet expensses
  • Average stock = (Opening stock + Closing stock) / 2
  • Cost of goods available for sale = Opening stock+ Purchases/Cost of goods manufactured
  • Trading expenses or operating expenses or general expenses are indirect expenses

Valuation of stock as on the Balance Sheet date if the physical inventory has been taken on a different date to that of balance sheet date
 

To ascertain the value of inventory as on Balance Sheet date, the cost of items which increases the value of closing stock as on the Balance Sheet date should be added to the value of physical inventory and the cost of items which decrease the value of closing stock as on the Balance Sheet date should be subtracted from the value of physical inventory.

Format:

 

Statement showing the computation of value of inventory if the physical inventory is taken on a date prior to the Balance Sheet date
 

Statement showing the computation of value of inventory as on Balance Sheet date

a)

 

Value on physical inventory date

 

xxx

Add:

b)

 

 

 

 

 

1) Cost of Purchases (net of purchases returns) from physical inventory date

to Balance Sheet date

xxx

 

2) Others which increase the value from physical inventory date to Balance Sheet date

Xxx
 

Xxx
 

Less:

 

 

c)

 
 



 

1) Cost of goods sold(net of sales return) from physical inventory date to Balance Sheet date

xxx

 

2) Others which decrease the value from physical inventory date to Balance Sheet date

xxx

Xxx

 

d)

Value of inventory on Balance Sheet date

 

Xxx

 

Statement showing the computation of value of inventory if the physical inventory is taken on a date after the Balance Sheet date.
 

Statement showing the computation of value of inventory as on Balance Sheet date

a)

Value on physical inventory date

 

xxx

 

 

Less:

 

 

b)

1) Cost of Purchases (net of purchases returns) from Balance Sheet date to physical inventory date

xxx

 

 

 
 

2) Others which increase the value from Balance Sheet date to physical inventory date

xxx

xxx

 

Add:

 

 

c) 

 
 

 
 

1) Cost of goods sold (net of sales return) from Balance Sheet date date to physical inventory date

xxx

 

2) Others which decrease the value from Balance Sheet date to physical inventory date

xxx

xxx

d)

Value of inventory on Balance Sheet date

 

xxx


Illustration : 6

Determine the value of stock to be taken to the Balance Sheet of A Ltd. as on 31st March, 2012 from the following information:
 

The stock was physically verified on 23th March and was valued at ₹ 4,00,000. After stock taking, the following transactions had taken place till 31st March:

  • Purchases of ₹ 3, 00,000 out of which 20% goods were returned
  • Sales of ₹ 3, 00,000 out of which 20% goods were returned by the customers
  • Goods are sold by the trader at a profit of 20% on sale price

Solution:

Statement showing the valuation of stock as on 31st March, 2012
 

Particulars

A. Stock as per physical verification as on 23rd March

4,00,000

B. Add: Cost of net goods purchased after stock taking till 31st March [₹ 3,00,000 - 20% of ₹ 3,00,000]

2,40,000

C. Less: Cost of net goods sold after stock taking till 31st March [80% of (₹ 3,00,000 - 20% of ₹ 3,00,000)]

(1,92,000)

D. Value of Stock as on 31st March 2012

4,48,000

 

Illustration 7

Determine the value of stock to be taken to the Balance Sheet of A Ltd. as on 31st March, 2012 from the following information:
 

The stock was physically verified on 10th April and was valued at ₹ 4,00,000. After 31st March, the following transactions had taken place till the date of stock taking:

  • Purchases of ₹ 3,00,000 out of which 20% goods were returned
  • Sales of ₹ 3,00,000 out of which 20% goods were returned by the customers
  • Goods are sold by the trader at a profit of 20% on sale price

Particulars

A. Stock as per physical verification as on 7th April

4,00,000

B. Less: Cost of net goods purchased after 31st March till stock taking [₹ 3,00,000 – 20% of ₹ 3,00,000]

(2,40,000)

C. Add: Cost of net goods sold after 31st March till stock taking [80% of (₹ 3,00,000 – 20% of ₹ 3,00,000)]

1,92,000

D. Stock as per books as at 31st March 2012

3,52,000





Test Your Skills Now!
Take a Quiz now
Reviewer Name