Before coming to the question, can Closing Stock appears in Trial Balance and if yes, on which side of Trial Balance, we must understand what a Trial Balance is? Trial Balance is a statement which signifies the arithmetical accuracy of Double Entry Book Keeping procedure.
All those accounts in a Ledger which has either debit balance or credit balance are placed in the Trial Balance on the respective sides and if the total of Trial Balance tallies, it is a prima facia evidence of the accuracy of Double Entry Book Keeping procedure of the business entity.
Now we understand what we mean by the term “Closing Stock”. Closing Stock is that part of purchase which remains unsold at the end of the year. The Formula for calculating Closing Stock is Opening Stock + Purchases – Cost of Goods sold.
So we have often seen that most of the time Closing Stock appears at the end of the Trial Balance by way of a Note. But can it appear inside the Trial Balance? Even if it appears in the Trial Balance, on which side will it find place?
Well, first of all, as already mentioned, closing Stock is that part of purchase which remains unsold during the current year. So the amount of closing Stock is already there in the Trial Balance in Purchases Account. Now if the amount of purchases is adjusted by way of deducting the value of unsold stock, Closing Sock may appear in the Trial Balance in the column of Debit Balances as Closing Stock is an Asset of the business.
So if it is mentioned in the question that the Purchases Account has an adjusted balance or it is mentioned as “Adjusted Purchases”, “Purchases“(Adjusted), then in such cases the Closing Stock will appear inside Trial Balance, else it will appear by way of a footnote below the Trial Balance.