In Trading and Profit and Loss account, opening stock appears on the debit side because it forms the part of the cost of sales for the current accounting year.
True
False
A
False
B
True
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Solution
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closing stock minus opening stock gives you the cost of goods used from the stock in hand. That's why opening stock is debited and closing stock is credited - To give effect to how much stock is used during the year for the sales.
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Similar Questions
Q1
In Trading and Profit and Loss account, opening stock appears on the debit side because it forms the part of the cost of sales for the current accounting year.
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Q2
State whether the following statement are true or false.
1. Final Accounts are prepared on the basis of Trial Balance.
2. Trading Account is a part of Profit & Loss Account.
3. Profit Loss Account is prepared to find out Gross Profit or Gross Loss.
4. Gross Profit or Gross Loss is transferred to Balance Sheet.
5. An amount of net profit is added to the capital.
6. All indirect expenses are debited to trading account.
7. Balance Sheet is a statement and not an account.
8. Capital account is a personal account.
9. Amount of prepaid expenses appears on assets side.
10. Bank Overdraft is a liability of business concern.
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Q3
From the following Trial Balance you are required to prepare trading and profit and loss account for the year ending March 31, 2017 and Balance Sheet on that date.
Particulars
Amount
(₹)
Particulars
Amount
(₹)
Opening stock
25,000
Sales
7,00,000
Furniture
16,000
Creditors
72,500
Purchases
5,55,300
Bank Overdraft
50,000
Carriage Inwards
4,700
Provision for bad and doubtful debts
2,100
Bad debts
1,800
Discount
500
Wages
52,000
Capital
2,00,000
Debtors
80,000
Purchases Return
20,000
Sales Return
15,000
Rent
24,000
Miscellaneous Expenses
3,400
Salaries
68,000
Cash
8,900
Drawings
14,000
Buildings
1,60,000
Advertising
10,000
Interest on Bank Overdraft
7,000
10,45,100
10,45,100
Adjustments
1. Closing stock valued at ₹ 36,000.
2. Private purchases amounting to ₹ 5,000 debited to purchases account.
3. Provision for doubtful debts @ 5% on debtors.
4. Sign board costing ₹ 4,000 includes in advertising.
5. Depreciate furniture by 10%.
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Q4
From the following information, prepare the Trading Account for the year ended 31st March, 2017: