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Introduction to Accounting 19

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.

1.5.19 Debtors
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.

1.5.20 Creditors
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. The total
amount standing to the favour of such persons and/or entities on the closing
date, is shown in the Balance Sheet as sundry creditors on the liabilities side.

Test Your Understanding - V

Mr. Sunrise started a business for buying and selling of stationery with Rs. 5,00,000
as an initial investment. Of which he paid Rs.1,00,000 for furniture, Rs. 2,00,000 for
buying stationery items. He employed a sales person and clerk. At the end of the
month he paid Rs.5,000 as their salaries. Out of the stationery bought he sold some
stationery for Rs.1,50,000 for cash and some other stationery for Rs.1,00,000 on
credit basis to Mr.Ravi. Subsequently, he bought stationery items of Rs.1,50,000
from Mr. Peace. In the first week of next month there was a fire accident and he lost
Rs. 30,000 worth of stationery. A part of the machinery, which cost Rs. 40,000, was
sold for Rs. 45,000.
From the above, answer the following :
1. What is the amount of capital with which Mr. Sunrise started business.
2. What are the fixed assets he bought?
3. What is the value of the goods purchased?
4. Who is the creditor and state the amount payable to him?
5. What are the expenses?
6. What is the gain he earned?
7. What is the loss he incurred?
8. Who is the debtor? What is the amount receivable from him?
9. What is the total amount of expenses and losses incurred?
10. Determine if the following are assets, liabilities, revenues, expenses or none of
the these: sales, debtors, creditors, salary to manager, discount to debtors,
drawings by the owner.

2018-19