Inventory glossary

What is Beginning inventory?

Beginning inventory is the value or quantity of stock a store holds at the start of an accounting period, before any purchases or sales for that period are recorded.

Beginning inventory matters because it is the baseline for every inventory calculation you run during a period. If it is wrong, your cost of goods sold, gross margin, and ending inventory will all be wrong too, even if everything else is tracked correctly.

For a small Shopify store, use beginning inventory at the start of each month or quarter to check that your books and your actual stock agree. If there is a mismatch, it usually points to shrinkage, unrecorded returns, or a counting error from the prior period that needs fixing before you trust any other number.

Formula

Beginning inventory = Ending inventory of prior period

Example

A candle store starts March with 400 units in stock, valued at 5 dollars each, so beginning inventory is 2,000 dollars. During March it buys 200 more units at 5 dollars (1,000 dollars) and sells 300 units. Ending inventory is 300 units, or 1,500 dollars, which checks out: 2,000 + 1,000 - 1,500 = 1,500 dollars cost of goods sold for the month.

Common mistakes

  • Using a system count instead of a verified physical count, which carries forward existing errors.
  • Forgetting to adjust for damaged, returned, or stolen stock before closing the period.
  • Mixing up cost value and retail value when recording the figure.

Beginning inventory and SteadyShelf

SteadyShelf turns your Shopify sales and each supplier's lead time into an order-by date and quantity for every product, then drafts the purchase order for you to approve.

SteadyShelf is launching on the Shopify App Store. Join early access to get the install link first.

Related terms

Ending inventory · Average inventory · Inventory valuation · Cost of goods sold · Physical inventory count

Full inventory glossary

FAQ

Does beginning inventory need to match a physical count?

Yes. You count what is physically on the shelf at the start of the month and use that number as beginning inventory, regardless of what the system says. Then you investigate the gap.

Why does beginning inventory matter for cost of goods sold?

It is the starting point of your inventory rollforward. Beginning inventory plus purchases minus cost of goods sold should equal ending inventory, so an error in beginning inventory throws off your whole calculation for the period.

Let SteadyShelf do this math for every SKU

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