1. What Is Ending Inventory?

Ending inventory represents the value of goods available for sale at the end of an accounting period. It is a crucial component in determining cost of goods sold and overall profitability for businesses using periodic inventory systems.

2. How Does The Calculator Work?

The calculator uses the ending inventory formula:

Where:

• \( Beginning\ Inventory \) — Inventory value at start of period (currency or units)
• \( Purchases \) — Additional inventory purchased during period (currency or units)
• \( Cost\ of\ Goods\ Sold \) — Cost of inventory sold during period (currency or units)

Explanation: This formula calculates the remaining inventory value after accounting for sales during the accounting period under periodic inventory systems.

3. Importance Of Ending Inventory Calculation

Details: Accurate ending inventory calculation is essential for proper financial reporting, tax compliance, inventory management, and determining gross profit margins.

4. Using The Calculator

Tips: Enter beginning inventory, purchases, and cost of goods sold in consistent units (either currency or physical units). All values must be non-negative numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is periodic inventory system?
A: Periodic inventory system updates inventory records at specific intervals (monthly, quarterly, annually) rather than continuously tracking each sale.

Q2: How does ending inventory affect financial statements?
A: Ending inventory appears on the balance sheet as a current asset and directly impacts cost of goods sold on the income statement.

Q3: What's the difference between periodic and perpetual inventory?
A: Periodic updates inventory at intervals, while perpetual continuously tracks inventory changes with each transaction using technology.

Q4: Can ending inventory be negative?
A: No, ending inventory should never be negative. A negative result indicates errors in data entry or calculation.

Q5: How often should ending inventory be calculated?
A: Typically calculated at the end of each accounting period (monthly, quarterly, or annually) for financial reporting purposes.