Stock Valuation Adjustments

# Stock Adjustments in PGBP Computation

When opening or closing stock is incorrectly valued, the profit must be adjusted to arrive at the correct PGBP income.

## Adjustment Rules

## Logic

• Opening Stock appears on the debit side of Trading Account → it reduces profit.
• If undervalued, it has under-reduced the profit, i.e., profit is overstated → reduce profit by amount of undervaluation.
• If overvalued, it has over-reduced the profit → add back the overvaluation.

• Closing Stock appears on the credit side of Trading Account → it increases profit.
• If undervalued, it has under-increased the profit → add the undervaluation.
• If overvalued, it has over-increased the profit → deduct the overvaluation.