Every business will produce goods in order to sell them to potential customers and earn revenue from sales.
Businesses usually produce goods keeping in mind the dynamics of the market. Therefore, it may happen that sometimes goods that are produced may remain unsold at the end of an accounting period.
This can happen due to various reasons, mostly which can be the demand of the product in the market, quality of the product or availability of competitors in the market.
The amount of goods that remain unsold in a given period is referred to as the closing stock of a business.
In this article, we will be discussing the formula for calculating the closing stock.
Closing Stock Formula
The formula for calculating closing stock is as follows:
Closing stock = (Opening Stock + Inward) – Outward
Closing Stock = Opening Stock + Purchases – Cost of Goods Sold
Opening Stock = Unsold goods that are brought forward from the previous accounting period
Purchases = New purchases or goods produced
Cost of Goods sold = Sale or cost of goods that are produced.
This was all about the Closing Stock Formula, which is important in determining the closing stock of a business at the end of an accounting period. For more such interesting concepts, stay tuned to BYJU’S.
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