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Lecture

chapter 15.docx

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Department
Accounting
Course
ACCT 301
Professor
All Professors
Semester
Fall

Description
Chapter 15 At the end of the accounting period, when the accountants begin to close off accounts in preparation for the financial statements, there are a few important tasks to do first. The first of which is to calculate the closing stock of the period, to prepare the Trading, Profit & Loss Account, Bank Reconciliation, etc. Stocktaking On the bases of the accruals concept, revenues should be matched with their relevant cost as per the corresponding period. As such, any stock that remains unsold at the end of the accounting period isn’t included as a part of the cost of sales for that period. Get it? Well, it’s like a prepayment, u don’t actually account for it during the current period, because it is relevant only to the following period. Well, for this reason, the company should find out how much stock it has on hand at the end of the accounting period, this stock is called closing stock, and the process of finding out how much you have of it is called stocktaking. This process is easy if the company is a relatively small where it could actually physically count each item of stock. Yet as the business grows larger the quantity of stock held becomes harder to determine. Therefore a business may wish to close down for a short period for a stock take, or a business may prefer to keep a detailed record of stock movements whilst baring the large related costs and headaches! In more complicated cases, a business may wish to maintain continuous stock re
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