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Ending inventory is the amount of inventory a company has in stock at the end of its fiscal year. It is closely related with ending inventory cost, which is the amount of money spent to get these goods in stock. It should be calculated at the lower of cost or market.
Cost of goods available for sale is the maximum amount of goods, or inventory, that a company can possibly sell during an accounting period.It has the formula: [1] Beginning Inventory (at the start of accounting period) + purchases (within the accounting period) + Production (within the accounting period) = cost of goods available for sale
FIFO and LIFO accounting are methods used in managing inventory and financial matters involving the amount of money a company has to have tied up within inventory of produced goods, raw materials, parts, components, or feedstocks. They are used to manage assumptions of costs related to inventory, stock repurchases (if purchased at different ...
Normally, ending inventory is stated at historical cost. However, there are times when the original cost of the ending inventory is greater than the net realizable value, and thus the inventory has lost value. If the inventory has decreased in value below historical cost, then its carrying value is reduced and reported on the balance sheet.
Average cost. The average cost method relies on average unit cost to calculate cost of units sold and ending inventory. Several variations on the calculation may be used, including weighted average and moving average. First-In First-Out (FIFO) assumes that the items purchased or produced first are sold first.
Two very popular methods are 1)- retail inventory method, and 2)- gross profit (or gross margin) method. The retail inventory method uses a cost to retail price ratio. The physical inventory is valued at retail, and it is multiplied by the cost ratio (or percentage) to determine the estimated cost of the ending inventory.
A periodic inventory system does not require day-to-day tracking of physical inventory. Purchases, cost of goods sold, and inventory on hand cannot be tracked until the end of the accounting time period when a physical inventory is performed and ending inventory is compared against the sum of beginning inventory and purchases.
On the balance sheet, WIP inventory is aggregated into the inventory line under current assets along with raw materials and finished goods. [ 16 ] To calculate WIP inventory at the end of an accounting period, the following 3 figures are required: beginning WIP inventory, production costs, and finished goods.