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Hello Sir, I was doing some question of preparation of single company financial statements in the kaplan exam kit, I have noticed that closing inventory is included in the trial balance of the questions. Is it right for closing inventory to be include in trial balance?
Thank you in advance for answering my question.
What a brilliant observation!
When I used to be involved in live teaching, this was something that I used to point out to the students (although I’m not convinced that any of them realised the significance!)
You are absolutely correct – closing inventory should NOT appear in a trial balance. Instead we should see a figure for “purchases” and a figure for “inventory (at the start of the year)”
Within the notes to the question there will be an indication of the value of closing inventory
Occasionally you’ll see in a trial balance what you have observed … a figure for “closing inventory” as an asset. But you’ll also notice a figure for “cost of sales” and it’s within that cost of sales calculation that lies the “other side” of that debit figure for closing inventory
Sadly (?) no one appears to get over-excited by this incorrect presentation of information … just me and, apparently, now you!
Join the club 🙂
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