Ending Inventory — Smart Financial Analysis
Calculate ending inventory with the core formula: Beginning + Purchases - COGS.
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Ending inventory = Beginning inventory + Net purchases - COGS. FIFO (First-In, First-Out) assumes oldest inventory is sold first; ending inventory reflects newer costs. COGS = Beginning inventory + Net purchases - Ending inventory. Shrinkage is the loss of inventory from theft, damage, obsolescence, or administrative error.
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Why: Ending inventory = Beginning inventory + Net purchases - COGS. It represents the value of unsold goods at period end and appears on the balance sheet as a current asset. It also...
How: Enter Beginning Inventory ($), Purchases ($), COGS ($) to get instant results. Try the preset examples to see how different scenarios affect the outcome, then adjust to match your situation.
Run the calculator when you are ready.
📊 Examples — Click to Load
Inputs
Inventory Flow Waterfall (Beginning + Purchases - COGS = Ending)
Inventory Turnover Comparison
Inventory Composition
Ending Inventory Trend
For educational purposes only — not financial advice. Consult a qualified advisor before making decisions.
💡 Money Facts
Ending Inventory analysis is used by millions of people worldwide to make better financial decisions.
— Industry Data
Financial literacy can increase household wealth by up to 25% over a lifetime.
— NBER Research
The average American makes 35,000 financial decisions per year—many can be optimized with calculators.
— Cornell University
Globally, only 33% of adults are financially literate, making tools like this essential.
— S&P Global
Ending inventory is the value of unsold goods at period end — it appears on both the balance sheet (asset) and income statement (through COGS). Walmart manages $56B in ending inventory across 10,500 stores. Getting it wrong by even 1% means a $560M misstatement. FIFO, LIFO, and weighted average methods can produce very different ending inventory values in inflationary environments.
📚 Sources
📋 Key Takeaways
- • Ending inventory = Beginning + Purchases - COGS
- • FIFO yields higher ending inventory in inflation; LIFO yields lower
- • Shrinkage and spoilage reduce ending inventory and increase COGS
- • Inventory turnover = COGS ÷ Average inventory; higher is usually better
💡 How Ending Inventory Works
Beginning inventory: value of goods on hand at period start.
— FASB ASC 330
Net purchases: total purchases minus returns and discounts, plus freight.
— AICPA
COGS: direct cost of goods sold during the period.
— SEC
Ending inventory flows to next period as beginning inventory.
— Investopedia
📖 Ending Inventory Formula
Ending Inventory = Beginning Inventory + Net Purchases - COGS. Example: $500K + $2M - $1.8M = $700K.
Ending = Beginning + Purchases - COGS
COGS = Beginning + Purchases - Ending
⚖️ FIFO vs LIFO Ending Inventory
FIFO assumes oldest inventory sells first; ending inventory reflects newer (higher) costs. LIFO assumes newest sells first; ending reflects older (lower) costs. In inflation, FIFO ending inventory > LIFO ending inventory.
| Method | Ending Inventory | COGS |
|---|---|---|
| FIFO | Higher (newer costs) | Lower |
| LIFO | Lower (older costs) | Higher |
🚨 Inventory Shrinkage
Shrinkage (theft, damage, obsolescence) reduces ending inventory and increases COGS. Retailers typically experience 1-2%; grocery and high-theft categories can exceed 3%. Physical counts reconcile book vs actual inventory.
📊 Weighted Average Cost
Weighted average = (Beginning + Purchases) ÷ Total units. Ending = Weighted avg × Units on hand. Smooths price fluctuations and is simpler than FIFO/LIFO for homogeneous goods like commodities.
🔄 Perpetual vs Periodic Inventory
Periodic: ending inventory determined by physical count at period end; COGS derived. Perpetual: inventory and COGS updated with each sale; ending inventory tracked in real time. Both use the same formula.
❓ FAQ
What is the ending inventory calculation?
Ending inventory = Beginning inventory + Net purchases - COGS. It represents the value of unsold goods at period end and appears on the balance sheet as a current asset. It also flows through to the income statement via cost of goods sold.
FIFO vs LIFO ending inventory — what's the difference?
FIFO (First-In, First-Out) assumes oldest inventory is sold first; ending inventory reflects newer costs. LIFO assumes newest inventory is sold first; ending inventory reflects older costs. In inflation, FIFO yields higher ending inventory and lower COGS than LIFO.
How do you derive COGS from ending inventory?
COGS = Beginning inventory + Net purchases - Ending inventory. If you know ending inventory from a physical count, you can back into COGS. This is the basis of the gross profit method when COGS is estimated.
What is inventory shrinkage?
Shrinkage is the loss of inventory from theft, damage, obsolescence, or administrative error. It reduces ending inventory and increases COGS. Retailers typically experience 1-2% shrinkage; grocery and high-theft categories can exceed 3%.
What is weighted average cost for ending inventory?
Weighted average cost = (Beginning inventory + Net purchases) / Total units available. Ending inventory = Weighted average cost × Units on hand. It smooths price fluctuations and is simpler than FIFO/LIFO for homogeneous goods.
Perpetual vs periodic inventory — how does it affect ending inventory?
Periodic inventory: ending inventory is determined by physical count at period end; COGS is derived. Perpetual inventory: inventory and COGS are updated continuously with each sale; ending inventory is tracked in real time. Both use the same formula: Beg + Purchases - COGS = Ending.
⚠️ Disclaimer
Estimates only. Consult a CPA or accounting professional. Not financial or audit advice.
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