How to Calculate Closing Inventory

by Carter McBride; Updated September 26, 2017
Determining ending inventory

Closing inventory, also known as ending inventory, is a company's inventory at the end of a period. Inventory is defined as items that a company has on hand for sale to consumers. Determining inventory helps companies calculate expenses. One of the most prominent expenses on a company's income statement is "cost of goods sold": beginning inventory, plus purchases, minus ending inventory.

Step 1

First determine the company's cost of goods sold by documenting beginning inventory and purchases for the period. For example, at the beginning of a month, a firm might have $500,000 of beginning inventory, plus $200,000 of additional inventory, while having a cost of goods sold of $400,000 for the month.

Step 2

Write out a formula by substituting the values determined in Step 1. The formula for determining ending inventory is "beginning inventory plus purchases minus cost of goods sold." Using the example given, it would be written as $500,000 plus $200,000 minus $400,000.

Step 3

Solve the formula. In the example, ending inventory equals $300,000.

About the Author

Carter McBride started writing in 2007 with CMBA's IP section. He has written for Bureau of National Affairs, Inc and various websites. He received a CALI Award for The Actual Impact of MasterCard's Initial Public Offering in 2008. McBride is an attorney with a Juris Doctor from Case Western Reserve University and a Master of Science in accounting from the University of Connecticut.

Photo Credits

bibliography-icon icon for annotation tool Cite this Article