- This topic has 1 reply, 2 voices, and was last updated 9 months ago by
.
- Posts
hi sir, pls help me with this question
A business has opening inventory of $15000 at the start of an accounting period and closing inventory of $18500 at the end of the accounting period.
Which of the following trial balance extracts correctly shows how the opening and closing inventory will be recorded in the general ledger?
Option A
Dr Closing inventory 15000
Cr Opening inventory 18500Option B
Dr Opening inventory 15000
Cr Closing inventory 18500Option C
Dr Opening inventory 15000
Dr Closing inventory – SFP 18500
Cr Closing inventory – SPLOCI 18500Option D
Dr Closing inventory – SFP 18500
Cr Opening inventory 15000
Cr Closing inventory – SPLOCI 18500My answer is D but the answer provided in acca study hub says C. Shouldn’t opening inventory be credited since it is being sold ? Don’t we normally debit cost of sales and credit opening inventory? Please help.
This question should not really be in the Study Hub because it relates to something called ‘extended trial balance’ which is no longer in the syllabus.
However the answer C is correct. The question is asking for what appears in the trial balance – not what the entries in the ledger will be.
As I do explain in my free lectures, the balance appearing on the trial balance is before the year end adjustments are made for the closing inventory. The balance on the ledger account before closing off the account will be a debit balance of the opening inventory. The other two balances listed in C are to reflect the entries that will need to be made later to record the closing inventory.
- You must be logged in to reply to this topic.