Introduction to Accounting

cash, for use or sale. In a trading concern, purchases are made of merchandise for resale with or without processing. In a manufacturing concern, raw materials are purchased, processed further into finished goods and then sold. Purchases may be cash purchases or credit purchases.

Stock (inventory) is a measure of something on hand-goods, spares and other items in a business. It is called Stock in hand . In a trading concern, the stock on hand is the amount of goods which are lying unsold as at the end of an accounting period is called closing stock (ending inventory). In a manufacturing company, closing stock comprises raw materials, semi-finished goods and finished goods on hand on the closing date.

Similarly, opening stock (beginning inventory) is the amount of stock at the beginning of the accounting period. Debtors are persons and/or other entities who owe to an enterprise an amount for buying goods and services on credit. The total amount standing against such persons and/or entities on the closing date, is shown in the balance sheet as sundry debtors on the asset side. Creditors are persons and/or other entities who have to be paid by an enterprise an amount for providing the enterprise goods and services on credit.