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In module chapter 10 illustration 5 there is abnormal item which is taken at cost in memo trading account (opening stock) Whereas in illustration 1 abnormal item is taken in opening stock at cost - written off value why so??
Answers (7)
This is because in illustration 5, The abnormal item is present in the godown at the time of fire, so it is shown separately in the memorandum trading account to ascertain stock on date of fire. In illustration 1, we can follow the alternative method given below for better understanding.
CA Suraj Lakhotia Admin
the stock in opening stock might have been sold at a different GP. So excluded to calculate stock based on normal GP. In Illustration 10, it should be a part of closing stock hence reversed.
Sir i also got same doubt sir today... I didn't get clarity sir... Would you pls explain clearly one more time sir
pullagorla sivaram
Sir i also got same doubt sir today... I didn't get clarity sir... Would you pls explain clearly one more time sir
To calculate normal gross profit, we need to ensure the we calculate it using normal valuations. Say some part of opening stock is sold at loss or lower profit or higher profit. This will be excluded to ensure that it does not impact the calculation. If we have written off some amount from closing stock, we add it back to bring it to normal valuation just for the purpose of GP calculation.
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