How to Figure Ending Inventory
You need to know ending inventory totals in order to prepare certain types of financial statements. To figure ending inventory, perform a quick calculation based on other inventory data. You can use this calculation to estimate either the number of items or the dollar value of inventory remaining.
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Instructions
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Determine the final ending inventory from last year, which is also the beginning inventory for the start of the new year. If this is your first year holding inventory, the beginning inventory for the year is zero. Say for the purpose of an example your beginning inventory is valued at $5,000 with 500 widgets in stock. The cost per unit in this example is $10.
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Add any purchases and additions to the inventory since the start of the year to the beginning inventory from the previous step. So for instance, if you purchased $1,000 in additional inventory (100 new widgets), your new total is $5,000 plus $1,000 equals $6,000 (600 widgets).
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Subtract any adjustments to inventory due to items that you withdrew for personal use. For instance, the owner of a haircare products store may use a few of the products in inventory for himself. Assume $100 in items withdrawn for personal use, which results in $6,000 minus $100 or $5,900 (590 widgets).
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Subtract the cost of goods sold (or the number of goods sold if you're trying to determine the number of items leftover) to determine the ending inventory remaining. So if you sold 400 widgets during the year valued at $4,000, your ending inventory is $5,900 less $4,000, which equals $1,900 (190 widgets).
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Tips & Warnings
It is wise to count the actual inventory to confirm that it matches the ending inventory figure you calculated.
