The closing stock implies inventory held at the end of the year. Thus, to derive information relating to closing stock we maintain a real account by name Closing Stock. It provides data relating to the value of stock unsold at the end of the accounting period. The value of closing stock is ascertained by physical verification of stock and its valuation at cost or market price whichever is lower.

Usually, the closing stock does not appear in the Trial Balance when the accounts are being finalized as the closing stock is ascertained by physical verification, which takes time in bringing up the value. Thus it appears as part of adjustment entry, which has to be passed before the preparation of Final Accounts.

If the closing stock is shown in the trial balance it means the adjustment for the closing stock has already been done and it will be shown as a current asset on the right side of the balance sheet. From the accounting point of view, aspects covered while preparing the accounts are:

Closing Stocks as shown on the Credit Side of Trading Account

Closing Stocks as shown on the Asset Side of Balance Sheet

However, if the value of the adjusted purchase(the cost of goods sold) is given then, the trial balance will show figures of both adjusted purchases account and Closing Stock Account.

Goods Distributed as Free Samples: In order to promote a product, free samples are supplied to experts in the field. For example, free samples of books to professors, free samples of medicine to doctors.

Since, it is a promotional activity, the cost of such samples should be treated as promotional expenses, say, and advertisement. Free sample distribution amounts to reduction in purchases or sale without a monetary return.

Goods Sold On Sale Or Approval Basis: In order to gain confidence of the customers on quality of the goods, sometimes goods are sold on approval basis. If the customer approves it, then it becomes a sale. If the customer does not approve it, then the sale is not complete and hence cannot be treated as sales. Suppose at the end of the financial year certain goods sent on approval basis are with the customers, then there is a need to pass necessary entries for adjustment.