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Question
Closing stock is credited in the
Closing stock is credited in the
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Solution
The correct option is A trading account
Closing stock is credited in the trading account of an organisation.
As per the matching principle of the accounts only those
expenses which are related to earn the revenue are debited
to the trading & profit and loss account, so that we can
arrive at the accurate profit or loss figure. And as the
purchase of material is debited to the trading account we
need to separate the material cost which does not match to
the revenue during the year hence we put the closing stock
which is not utilised yet to earn the revenue and will be
utilised in the future. That's why we always put the closing
stock figure to the credit side of trading account.
Closing stock is credited in the trading account of an organisation.
As per the matching principle of the accounts only those
expenses which are related to earn the revenue are debited
to the trading & profit and loss account, so that we can
arrive at the accurate profit or loss figure. And as the
purchase of material is debited to the trading account we
need to separate the material cost which does not match to
the revenue during the year hence we put the closing stock
which is not utilised yet to earn the revenue and will be
utilised in the future. That's why we always put the closing
stock figure to the credit side of trading account.
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