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.
How to Calculate the Beginning Inventory for Raw Materials
Raw materials are items, such as lumber, that a manufacturer uses to make finished products that are sold to customers. Raw materials...
How to Calculate Inventory Turnover
Inventory turnover can refer to anything from how long a box of cereal sits on a grocery store shelf to the frequency...
How to Calculate Finished Goods
Several factors must be taken into consideration when determining your finished goods inventory. Most factories have switched their production strategies to "just...
How to Calculate Work in Process
A manufacturing company converts raw materials and purchased components into an inventory of finished goods. Work in process is an intermediate step...
How to Calculate Inventory for a Balance Sheet
The value of inventory on a balance sheet is the value of beginning inventory plus purchases less the cost of goods sold.
How to Calculate Ending Inventory
The basic formula to calculate ending inventory is beginning inventory plus purchases minus cost of goods sold. Although the number of units...
How to Calculate an Inventory Reserve
Inventory reserve is that portion of a company's earnings set aside, or escrowed, to pay for and maintain company inventory. Since this...
How to Calculate Inventories
In many ways, inventory management is the life blood of a successful business. This is why it's important for business owners to...
How to Calculate Merchandise Inventory
Conducting a physical inventory of the merchandise in a store or shop should result in figures that are very close to the...