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.
Stock • Stock is the quantity of unutilized or unsold goods lying with the organization.
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
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.
Purchase of Stock • Credit Cash Account OR Supplier / Creditor Account • Debit Stock Account
Payment to Creditors • DebitSupplier / Creditor Account • Credit Cash Account
Sale of Goods • DebitCost of Goods Sold • Credit Stock Account
+ Opening Stock + Purchases – Value / Cost of Goods Sold = Closing Stock
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
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