1. What Is Ending Inventory?

Ending inventory is the value of goods available for sale at the end of an accounting period. It's a crucial component in determining cost of goods sold and gross profit for financial statements.

2. How The Calculation Works

The calculator uses the basic inventory formula:

Where:

• Beginning Inventory — Inventory value at start of period
• Purchases/Production — Additional inventory acquired during period
• Cost of Goods Sold — Value of inventory sold during period

Explanation: This formula maintains the inventory equation where what you start with, plus what you add, minus what you remove equals what remains.

3. Importance of Ending Inventory

Details: Accurate ending inventory valuation affects financial statements, tax liabilities, and business decision-making. It impacts balance sheets (assets) and income statements (COGS).

4. Using The Calculator

Tips: Enter all values in consistent units (either physical units or monetary value). Ensure beginning inventory and purchases are positive numbers, and sold amount doesn't exceed available inventory.

5. Frequently Asked Questions (FAQ)

Q1: What inventory valuation methods can be used?
A: Common methods include FIFO (First-In, First-Out), LIFO (Last-In, First-Out), and weighted average cost.

Q2: How often should ending inventory be calculated?
A: Typically at end of each accounting period (monthly, quarterly, annually) for financial reporting.

Q3: What's the difference between periodic and perpetual inventory?
A: Periodic counts inventory at intervals, while perpetual continuously tracks inventory changes.

Q4: How does ending inventory affect taxes?
A: Higher ending inventory decreases COGS, increasing taxable income. Lower ending inventory has opposite effect.

Q5: What if my calculated ending is negative?
A: This indicates an error - either in recording sales or beginning inventory. Physical inventory counts help verify.