Question -
Answer -
Cost of goods that remains unsold in the inventory after completion of the accounting period is referred to as the closing stock. The closing stock value is determined by comparing the realisable value and cost price. The lesser among two values is considered as the value of closing stock.
In final accounts the closing stock is adjusted by:
1) Crediting the closing stock to trading and profit and loss account.
2) Placing it on the asset part of the balance sheet.
Following entries need to be passed for adjustment
Closing Stock A/c Dr.
To Trading A/c