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Ratio analysis 6th illustration

Financial Management

Hello sir , in illustration 6 of ratio analysis, in the accounting information they mentioned about the stock of finished goods but while calculating the works cost in cost sheet in module sir considered closing stock of finished goods as zero and in the p/L account also sir didn't mention about the closing cost of finished goods . My question is why we didn't consider the stock of finished goods while computing workscost and why we didn't mention about stock of finished goods in trading and p/L account??

Rushitha Puvvada

CA Final

★ 5K+

16-Feb-21 11:02

333

Answers (1)

In works costs and Trading & P&L account we are directly taking gross profit & net profit respectively. The GP & NP numbers are arrived at after adjusting for closing stock. hence you are not required to use them in these statements. however the closing stick of RM & FG are required in BS where they are shown as part of current assets and also to compute cash balance