What is Stock? Meaning, Features, and More.

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The word stock has different meanings in different areas, for now, we are talking about goods-related stock.

Accounting is a world in itself and hence it has its own fundamentals that help in understanding and improving the accounting system and one of these fundamentals is the accounting terms that help in understanding accounting theoretically and one of these terms is stock. Usually, the term stock is used to represent the goods available in the business, or in other words, the goods that the business has purchased and has not sold yet are called stock.

Stock includes raw materials, semi-finished goods, finished goods, etc. and it depends on the nature of the business for example if a business manufactures the product itself then it can have all the three types of stock available or if a business deals only with finished goods, then that business can have only finished goods stock.

What is Stock?

Stock is an accounting term used to represent the goods available in a business at a specific time period. In simple words, the goods lying within the business is called stock. It is a current asset of the business and is shown as a closing stock on the credit side of the trading account and the asset side of the balance sheet. Normally in a business, it increases when purchases are made and decreases when sales are made.

Goods are called stock for any business only when it has possession or ownership of those goods, if a business does not have possession or ownership then it is not called stock for that business, and possession or ownership of goods comes to any business through purchase whether the purchase is in cash or on credit.

In accounting, stock is managed through a stock account but not all businesses prepare this account. Whenever a stock account or related account is closed, the stock left at that time is called closing stock which later becomes opening stock. The stock account or related account is usually closed at the end of the financial year, but the business can do it before that if it wishes. Note: Governing authority can influence this.

Features of Stock

Following are the features of stock:

1. Accounting Term:

Stock is an accounting term used to represent the goods available/lying in a business at a specific time period and any goods are considered stock for a business only as long as it has the possession/ownership of those goods. Once a business sells the goods it is no longer considered stock for the business even if the goods are still lying with the business

2. Asset:

Stock is an asset of the business because it has already been purchased by the business and is owned or occupied by the business. In assets, it is a current asset or working asset because it is considered to be traded in a short time period which is usually less than a year and is shown under current assets on the asset side of the balance sheet.

3. Recorded on the Books:

Stock is recorded in accounting books such as Ledger Account, Trading Account, Balance Sheet, etc. In the Ledger Account, all the transactions relating to stock are recorded and in the Trading Account it is recorded on the credit side as closing stock, and in the Balance Sheet, it is recorded on the asset side under current assets as closing stock. Note: In Trading Account and Balance Sheet, it is recorded only when closing stock is available in the business.

4. Possession/Ownership:

The business has ownership/possession over the stock because, for any business, any goods are called stock when it has ownership/possession of those goods. In simple words, when a business buys goods, it gets the ownership/possession of those goods due to which the business gets the right over goods, and as soon as it sells those goods, it loses the ownership/possession of those goods due to which the business also loses the right over those goods.

5. Classified:

Stock is mainly classified into three parts such as raw materials, semi-finished goods, and finished goods and this classification is also known as stages of goods. The type of stock a business has depends on the nature of the business. For example, in a manufacturing business, all three types of stock may be available.

Read Also:

• What is Goods? Meaning, Features, and More.
• What is Accountancy? Meaning, Features, and More.
• What is Accounting? Meaning, Features, and More.
• Accounting Concepts
• Accounting Conventions

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