Ending Inventory

Definition: Ending Inventory is the dollar value of merchandise, raw materials, work in process, and finished goods that a company has on hand at the end of an…

Ending Inventory is the dollar value of merchandise, raw materials, work in process, and finished goods that a company has on hand at the end of an accounting period. It appears on the balance sheet as a current asset and is the residual after units sold are removed from goods available for sale: Ending Inventory = Beginning Inventory + Net Purchases − Cost of Goods Sold. The valuation depends on the cost-flow assumption chosen — FIFO, LIFO (US GAAP only), Weighted Average, or Specific Identification — and is subject to the Lower of Cost or Net Realizable Value rule under ASC 330 (Lower of Cost or Market under LIFO/Retail). Ending inventory is verified by physical count under both periodic and perpetual systems, and an error in ending inventory creates a self-correcting two-period misstatement of cost of goods sold and net income.