Calculating Beginning Inventory

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Beginning inventory is the amount of inventory on hand before the sales cycle begins. Beginning inventory is an accounting classification that includes any closing inventory found on the balance sheet at the end of the previous accounting period. This calculation is typically carried forward from the previous period, and helps an organization gain an accurate understanding of the total inventory sold over a specific period of time.

  • Locate the balance sheet from the previous period. This will provide the total amount of inventory available at the beginning of the current sales cycle.

  • Verify if any additional inventory was purchased between the previous and current period. Any transactions that have occurred after the closing trial balance of the previous period may need to be recorded into the general journal to ensure accuracy.

  • Post any additional inventory acquired to the appropriate accounts. This will ensure that the total amount of beginning inventory for the period is accurate.

  • Calculate total inventory available. This will be a combination of the total from Step 1 and any additional transactions that took place in Step 2 and items reported in Step 3.

Tips & Warnings

  • Average inventory is another valuable calculation that can help determine the value of inventory during any particular period.
  • Maintaining accurate records of beginning inventory during each accounting period will ensure that all calculations and sales projections are also accurate.
  • Maintaining accurate records of beginning inventory during each accounting period will ensure that all calculations and sales projections are also accurate
  • Beginning inventory calculations can be skewed if any transactions that occur after the closing trial balance was prepared are not posted accurately.
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