What is Ending inventory?

Ending inventory tells a store owner what is left on the shelf and what it is worth at a specific point in time, usually month end or year end. It feeds directly into cost of goods sold and gross profit, so if the number is wrong, the profit figure on your income statement is wrong too.

Use it to close the books each period and to spot problems early. A big jump in ending inventory value without a matching jump in sales usually means you bought too much or sales slowed down. Track it alongside sales to judge whether your stock levels are in line with demand.

Formula

Example

A candle store starts the month with 500 dollars of inventory at cost. During the month it buys 1,200 dollars of new stock and sells candles costing 1,000 dollars to produce. Ending inventory is 500 + 1,200 - 1,000 = 700 dollars.

Common mistakes

• Using retail price instead of cost when valuing ending inventory, which inflates the number.
• Forgetting to include incoming stock that was received but not yet counted or recorded.
• Not adjusting for damaged, lost, or returned items, so the figure does not match a physical count.

Ending inventory and SteadyShelf

SteadyShelf does not calculate accounting figures like ending inventory, but accurate purchase order and receiving records from it make the purchases side of this calculation easier to pull together.

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

Related terms

Beginning inventory · Cost of goods sold · Inventory valuation · On hand inventory · Average inventory

Full inventory glossary

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