#Ending inventory formula fifo how to#

Once you have these numbers, you can plug them into the following formula to calculate ending inventory.

Cost of Goods Sold (COGS): cost of inventory sold during the month.

Purchases: cost of inventory added during the month.

Beginning Inventory: prior month’s ending inventory value.

Ending inventory takes into account all that happens each month, starting with beginning inventory (the cost of purchasing or manufacturing any inventory you added during the month) and the cost of goods sold that month. To calculate ending inventory, the numbers you’ll need are: Many businesses track their financials in monthly accounting periods. Today’s inventory management systems integrate smoothly with warehouse management systems and sophisticated 3PL fulfillment platforms to put real-time numbers at your fingertips in seconds.

But for many businesses this would be a cumbersome, time-consuming process. This simple metric tells you how much cash you have tied up in inventory on an ongoing basis.ĭepending on the size of your business, you could physically count your inventory every month.

The amount you have left over, expressed as a dollar value, is both your ending inventory for the current period, and the beginning inventory (or the amount you start with) for the next accounting period. What is Ending Inventory?Įnding inventory is an accounting term that refers to the value of the inventory you have left at the end of an accounting period. It can also prevent problems such as overstocks or stockouts from growing out of control.

#Ending inventory formula fifo how to#

Knowing how to calculate ending inventory and continually monitoring it is critical for growing your business and maintaining profitability. Do you know how to calculate ending inventory? This simple calculation tells you the status of your end-of-period inventory.