The formula for Managing Inventory

  • What is beginning inventory?

Beginning inventory is the dollar worth of all inventory held by a company at the start of an accounting period, and it reflects all goods that can be used to generate revenue. To better comprehend the value of your inventory at the start of a new accounting period, apply the beginning inventory formula.

How to calculate beginning inventory?

 

  1.   Using the records from the preceding accounting period, calculate the cost of goods        sold (COGS).
  2. Multiply your finishing inventory balance by the cost of each item’s manufacture. Calculate the amount of new inventory in the same way.
  3. Add the ending inventory and the cost of products sold to the total.
  4. Subtract the quantity of inventory purchased from your result to calculate initial inventory.

What is beginning inventory?

 

Beginning inventory is the dollar value of all inventory held by a business at the start of an accounting period, and represents all the goods a business can put toward generating revenue. You can use the beginning inventory formula to better understand the value of your inventory at the start of a new accounting period.


How to calculate beginning inventory?

 

  1. Determine the cost of goods sold (COGS) using your previous accounting period’s records.
  2. Multiply your ending inventory balance with the production cost of each item. Do the same with the amount of new inventory.
  3. Add the ending inventory and cost of goods sold.
  4. To calculate beginning inventory, subtract the amount of inventory purchased from your result.
  5. Beginning inventory calculator
  6. To save you time, we have built a beginning inventory calculator just for you:
  7. Beginning inventory calculation with examples
  8. Determine the cost of goods sold (COGS) using your previous accounting period’s records. Example: Candles cost $2 each to produce, and Jen’s Candles sold 600 candles during the year. COGS = 600 x $2 = $1200

Use your accounting records to calculate your ending inventory balance and the amount of new inventory purchased or produced during the period. Example: Jen’s Candles had 800 candles in stock at the end of the previous accounting period, and produced a further 1000 candles during the next year.


Ending inventory = 800 x $2 = $1600. New inventory = 1000 x $2 = $2000

Add the ending inventory and cost of goods sold. Example: $1600 + $1200 = $2800

To calculate beginning inventory, subtract the amount of inventory purchased from your result. Example: $2800 – $2000 = $800


What is the definition of “starting inventory”?


Beginning inventory is the dollar worth of all inventory held by a company at the start of an accounting period, and it reflects all goods that can be used to generate revenue. To better comprehend the value of your inventory at the start of a new accounting period, apply the beginning inventory formula.


How do you figure out what your starting inventory is?


Using the records from the preceding accounting period, calculate the cost of goods sold (COGS).

Multiply your finishing inventory balance by the cost of each item’s manufacture. Calculate the amount of new inventory in the same way.