Closing stock is shown inChoose one optionProfit and Loss AccountTrading Account and Balance SheetOnly in Trading A/cOnly in Balance Sheet

Understanding the Context

Closing stock represents the value of goods available for sale at the end of an accounting period. Its treatment in financial statements is crucial for accurate financial reporting.

Relevant Concepts

1. Trading Account: Used to calculate the gross profit or loss. Closing stock is included here to determine the cost of goods sold.
2. Profit and Loss Account: Primarily for calculating net profit or loss after including gross profit or loss from the trading account.
3. Balance Sheet: Represents financial position at a specific point in time and includes closing stock as a current asset.

Analysis

1. In the Trading Account, closing stock is subtracted from the total cost of goods available for sale to ascertain the cost of goods sold, affecting gross profit.
2. The Balance Sheet reflects the closing stock as an asset and is important for the assessment of the company's liquidity and overall financial health.
3. The Profit and Loss Account ultimately reflects the profits derived from the trading account but does not separately state closing stock.

Verification

Closing stock must be shown both in the Trading Account to calculate the cost of goods sold and on the Balance Sheet as a current asset. However, it is not shown solely in the Profit and Loss Account.

Final Answer

Closing stock is shown in Trading Account and Balance Sheet.