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Beginning inventory is a complicated part of\u00a0<\/span>inventory management\u00a0that many business owners don\u2019t understand.\u00a0<\/p>\n But it\u2019s important to get right. By tracking beginning inventory, you can monitor inventory levels and better forecast what you need to order and when. That way, you can run a more effective and efficient operation.\u00a0<\/p>\n Ahead, you\u2019ll learn how to calculate and use beginning inventory in your store.\u00a0<\/p>\n Beginning inventory is the value of your company\u2019s inventory at the beginning of an accounting period. To calculate beginning inventory, you can use the following formula: (COGS + ending inventory) – inventory purchases.<\/p>\n Beginning inventory, also known as opening inventory, should equal the previous period\u2019s ending inventory. If you\u2019ve got $10,000 tied up in inventory at the end of a quarter, for example, you have the same amount in beginning inventory for the next quarter.\u00a0<\/p>\n The simplest beginning inventory calculation uses this formula:<\/p>\n (COGS + ending inventory) – inventory purchases = beginning inventory<\/p>\n Let\u2019s put that into practice and say you spent $5,000 manufacturing products throughout the year. You ended the previous accounting period with $10,000 ending inventory. From that $15,000, subtract the $6,000 you spent on inventory. Beginning inventory would be valued at $9,000.<\/p>\n To recap, here\u2019s the formula for calculating the value of inventory at the start of an accounting period: (COGS + ending inventory) – inventory purchases = beginning inventory.<\/p>\n Let\u2019s put the calculation into practice based on these figures:\u00a0<\/p>\n ($50,000 + $75,000) – $20,000 = $105,000 beginning inventory valuation<\/p>\n Manage your inventory with confidence<\/p>\n Only Shopify POS helps you manage warehouse and retail store inventory from the same back office. Compare inventory costs to revenue, see which items are selling out or sitting on shelves, forecast demand, and more.<\/p>\n<\/div>\n Beginning inventory has many uses beyond just accounting purposes. Below are a few of the different ways you can use beginning inventory:<\/p>\n The process for calculating beginning inventory relies on several other calculations. Let\u2019s break down the other accounting formulas you\u2019ll need to know.\u00a0<\/p>\n Cost of goods sold (COGS) shows how much money you\u2019ve spent manufacturing products that have already been sold. This includes labor, shipping fees, production costs, and the price of raw materials.<\/p>\n Here\u2019s the formula for calculating cost of goods sold:<\/p>\n COGS = (beginning inventory + purchases during period) – ending inventory<\/p>\n The cost of goods sold depends on the inventory method you\u2019re using. We\u2019ve outlined the four most common inventory systems below. Caution: Whichever you choose, you\u2019ll need to stick with. Otherwise, you risk inconsistent data wreaking havoc with your financial reports.<\/p>\n Ending inventory\u00a0is the dollar value of stock you have at the end of an accounting period. For this reason it\u2019s sometimes referred to as closing inventory, and should match the beginning inventory for the accounting period that immediately follows.\u00a0<\/p>\n The formula to calculate ending inventory is:<\/p>\n Beginning inventory + new purchases – cost of goods sold (COGS) = ending inventory<\/p>\n Inventory is the largest expense for any retailer. Understand how much you spend on inventory and use it to determine the value of your stock at the start of an accounting period by\u00a0calculating inventory costs:<\/p>\n Inventory costs = purchase costs + ordering costs + holding costs + shortage costs<\/p>\n It\u2019s clear beginning inventory plays an important role in accounting and business operations. Here are a few reasons why:\u00a0<\/p>\n Retailers use beginning inventory to understand whether they\u2019re holding too much inventory\u2014or not enough\u2014for the month, quarter, or year ahead.<\/p>\n Again, beginning inventory is a metric you\u2019ll need to calculate at the start of any new accounting period. Use this formula to calculate yours, and rely on it to identify shrinkage, understand seasonal trends, and prepare for tax season.<\/p>\n Unify your inventory management with Shopify<\/p>\n Only Shopify POS helps you manage warehouse and retail store inventory from the same back office. Shopify automatically syncs stock quantities as you receive, sell, return, or exchange products online or in store\u2014no manual reconciling necessary.<\/p>\n<\/div>\n Beginning inventory is the cost of goods available for sale at the start of a reporting period. An example of beginning inventory would be the cost of the items a store had in stock as of January 1st.<\/p>\n<\/div>\n<\/div>\n Beginning inventory is the amount of a particular item that a business has in stock at the start of an accounting period. End inventory is the amount of a particular item that a business has in stock at the end of an accounting period.<\/p>\n<\/div>\n<\/div>\nWhat is beginning inventory?<\/h2>\n
Beginning inventory formula<\/h2>\n
How to calculate beginning inventory<\/h2>\n
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Uses for beginning inventory<\/h2>\n
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How to find beginning inventory<\/h2>\n
Cost of goods sold<\/h3>\n
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<\/div>\nEnding inventory<\/h3>\n
Inventory purchases<\/h3>\n
Why is beginning inventory important?\u00a0<\/h2>\n
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Calculate your beginning inventory<\/h2>\n
Beginning inventory FAQ<\/h2>\n
What is an example of beginning inventory?<\/h3>\n
What is beginning and end inventory?<\/h3>\n
Is beginning inventory an expense?<\/h3>\n