1. Sales:

It includes both cash and credit sales of goods. Sales of fixed assets such as old typewriter, machinery, furniture, etc., should not be included in sales. If there are some sales returns (returns inwards), they will be deducted from the total sales in the inner column and only the net sales will be shown in the outer column.

2.Closing Stock:

As already stated, closing stock must be taken into account for determining the cost of goods sold. For finding out the amount of closing stock, each product lying unsold at the end of the year is physically counted and their complete list is prepared. Then each product is valued at cost price or the market price whichever is lower. 

Thus the total value of closing stock is worked out at the end of the accounting year for the purpose of preparing the final accounts. This is called stock taking. Remember that the closing stock does not appear in the Trial Balance. It is an item of an additional information which needs an adjustment at the time of preparing the final accounts. The closing stock is shown on the credit side of the Trading Account and also as an asset in the Balance Sheet. The following journal entry is passed in the Journal Proper to record the amount of closing stock.

Stock (closing) Account Dr.

To Trading Account (Being the value of closing stock brought into account)