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2.4 Double Entry Book Keeping—ISC XI
10. Goods Traded in. Items that are purchased with the purpose to sell.
Goods Traded are the goods purchased with the purpose of reselling. In other words,
they are the products in which an enterprise is dealing or trading in. For example, for an
enterprise trading in home appliances, T.V., fridge, washing machines, A.C., etc., are goods.
Similarly, for a stationer, stationery is goods, whereas for others, it is an item of expense
(not purchases).
11. Stock (Inventory). Goods remaining unsold or unused in manufacturing as on a particular date.
Stock (inventory) is the tangible property held by an enterprise for resale in the ordinary
course of business or for the purpose of using it in the production of goods meant for sale
to be rendered. Stock may be opening stock or closing stock. The closing stock of one period
becomes the opening stock of the next period.
In case of a trading concern, it comprises closing stock in hand or the amount of goods
which are lying unsold at the end of an accounting period of the goods traded in.
Stock in the case of a manufacturing concern is of raw materials, work-in-progress and
finished goods. They are discussed hereunder:
(i) Raw Materials. Raw Material is a material or substance used in production or
manufacturing of goods. After the manufacturing process, the form or shape of raw
materials is often changed to suit a particular requirement. It should be kept in mind
that a raw material shall be goods traded in for the dealer of raw material commodity.
For example, paper is goods traded in for a paper dealer. It is a raw material for a
notebook manufacturer who produces notebooks after carrying out further processes
like ruling, sizing and binding.
(ii) Work-in-Progress (i.e., Semi-finished Goods). Work-in-Progress means raw material
that has entered into the production process but is not yet a finished product.
Work-in-Progress (WIP), therefore, means all materials and partly finished products
that are at various stages of the production process to be a finished product. Continuing
with the example in raw material, a copy manufacturer has completed the ruling
process on paper but it is yet to be sized and bound. The ruled paper is Work-in-Progress.
(iii) Finished Goods. Finished goods mean the goods which have undergone the complete
process of manufacturing and are ready for sale but are yet to be sold. Continuing the
above example, a notebook manufacturer has completed the manufacturing process,
i.e., notebooks are ready for sale. The stock of notebooks ready for sale is the stock of
finished goods.
12. Profit. Excess of revenue over expenses.
Profit is categorised into:
(i) Gross Profit. Excess of Sales over Cost of Goods Sold.
Gross Profit = Sales – Cost of Goods Sold*
In other words, Gross Profit means excess of Revenue over Cost of Goods sold.

*Cost of Goods Sold = Opening Stock + Purchases + Direct Expenses – Closing Stock.