What is the meaning of Increase/Decrease in Stock in trade and work in progress

Hi ,

I was checking a Balance Sheet and came across :
Increase/Decrease in Stock in trade and work in progress

For FY 90-10 it was 11 crores decrease
For Fy 10-11 it is 100 crores increase

What does it mean ? Should be it positive or negative ? i i.e inc or decrease ?
If it is inventory , it should always be decrease ?


Well-Known Member
If I am not mistaken, you were reading the Cash Flow Statement of the Entity. While calculating "Cash Generated from Operating Activities" during the year, we need to make the adjustment for Working Capital Changes.

Increase/Decrease in Stock-in-Trade and Work-in-Progress refers to the change in Closing Inventory Levels during the two Financial Years.

There is no Hard and Fast Rule that the change should always be positive or should always be negative..... Depends upon a lot of factors - management analysis, market conditions, seasonal effect, etc.

However, at a first glance the two figures of 11 crores and 100 crores seem a bit too much variation..... So, look at the Closing Value of Inventory in the Balance Sheet and see the change in percentage terms and see if that change satisfies you.....
Let me clarify again .
FA has a profit of 7 crore in 09-10 . The break up is :

85 crore net income
45 crore raw material
25 crore power
(11) crore ( Decrease in Stock-in-Trade and Work-in-Progress )
4.5 Employees
10 crore other
74 crore net expenditure
11 crore net profit

THe same thing becomes 1 crore ( Increase in stock in trde ) most other things are same ... and the net profit becomes 3 crore .


Well-Known Member
If you want to know the meaning of Change in Stock in trade and WIP, I have mentioned that earlier....

Regarding Profit before Tax...... there are other items in between which are taken into consideration for its computation..... what's the problem..... :confused:


Active Member
Work in Progress on 31st March will be converted to Finished goods and sold and taken to Turnover. During the current quarter some raw materials will be in the shape of Work in progress. So the following formula will be used:

(Stock in trade as on 30.6.11 + WIP as on 30.6.11) - (stock in trade as on 31st March + WIP as on 31st March)

If the difference is positive, this is called accretion; if it is negative, it is called decretion. As this is supposed to be a part of production during the quarter, it is adjusted with the turnover or income of the company. If it is positive, it is added to turnover / income. If it is negative, it is deducted from turnover / income.
Thanks all , but I need to understand - is the inventory level high currently ? Is there any double standards adopted here to show a higher income than the actual values ? I thought the company has a profit margin close to 10% .
Is it like - the companies inventory level's rose this time around - causing the profit marging to show up temporarily as poor ? Which might be offset next quarter ?
Accounting looks very tough subject :0

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