Finished Goods Inventory
Definition: Completed products ready for sale
Scope:ModerateDifficulty:Easy
Completed products ready for sale
Common Journal Entries
| Account | Debit | Credit |
|---|---|---|
| 1. Transfer from WIP | ||
| Production complete; $12,000 of goods finished. | ||
| Finished Goods InventoryAsset+ | $12,000 | |
| Work-in-Process InventoryAsset− | $12,000 | |
| Goods move from production to warehouse. | ||
| 2. Record sale (cost side) | ||
| Sell finished goods costing $12,000. | ||
| Cost of Goods SoldExpense+ | $12,000 | |
| Finished Goods InventoryAsset− | $12,000 | |
| Cost matched to revenue when goods are sold. | ||
T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.
Finished Goods InventoryFinished Goods InventoryAssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$12,000.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$12,000.00
$0.00
Work-in-Process InventoryWork-in-Process InventoryAssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$12,000.00
$12,000.00
Cost of Goods SoldExpense account — the direct cost of merchandise sold to customers. Debits increase the balance. Only recorded at the time of sale under the perpetual method.ExpenseA cost incurred in the process of earning revenue. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$12,000.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$12,000.00
DurationShort-Term
External Links
- Finished goods — Wikipedia