Understanding Stock Ledger and Valuation

The video tutorial explains how Daniel, a store owner, deals with his stock records and valuation. It covers the importance of maintaining separate stock records, different methods of stock valuation like FIFO and weighted average, and the principles of conservatism and consistency. The tutorial also discusses verifying stock records with physical counts and recording closing stock in accounting books. By the end, Daniel is equipped to make informed decisions about his stock clearance sale.

Why was Daniel surprised when he checked the trial balance?

• The trial balance showed incorrect purchases.

• The trial balance was missing.

• There was no mention of stock details.

• He found an error in the sales amount.

What is the primary reason for maintaining separate stock records?

• To simplify tax calculations.

• To provide detailed quantitative information.

• To avoid errors in financial statements.

• To reduce accounting workload.

Which method of stock valuation assumes that the first goods purchased are the first to be sold?

• Specific Identification

• FIFO

• LIFO

• Weighted Average

What is the weighted average method of stock valuation?

• It uses the highest purchase price for valuation.

• It values stock based on the oldest purchase price.

• It averages the cost of all lots for valuation.

• It values stock based on the latest purchase price.

Why is it important to be consistent with the stock valuation method?

• To comply with tax regulations.

• To maximize profits.

• To ensure comparability across accounting periods.

• To simplify the accounting process.

How are stock records verified for accuracy?

• Through supplier confirmations.

• By comparing with sales records.

• Through physical stock counts.

• By checking purchase invoices.

What is the journal entry for recording closing stock?

• Trading Account debit to Closing Stock Account

• Trading Account credit to Closing Stock Account

• Closing Stock Account debit to Trading Account

• Closing Stock Account credit to Trading Account