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Does the opening inventory account in tiral balance refer to Income Statement accounts (or B/S account) ?
Opening inventory is shown at the debit side of the income statement and closing inventory is shown on credit side of income statement. Opening inventory is not shown in Balance sheet only closing inventory is shown in balance sheet.
Okay. But how can i determine it? Related to F3 study text there are following rules:
Dr+ entry shows increase in:
1) Assets
2) Expenses
3) LossesCr+ entry shows increase in:
1) Capital
2) Income
3) LiabilityAccording to these rule the does the opening inventory relate to expenses? (cause opening inventory shows in debit side)
Debit increase in asset and credit decrease in asset. Since inventory is an asset you will follow this rule.
For your knowledge:
Suppose there has been an inventory loss/damage reasons such as fire, obsolescence: the loss/damage becomes and expense. The inventory decreases thus you will credit it and debit the loss/damage as an expense
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