Ending Inventory

AAA

DEFINITION of 'Ending Inventory'

The value of goods available for sale at the end of the accounting period. The ending inventory is recorded as the lower of the cost of the inventory or the market value of the inventory. Assuming no write-downs, the ending inventory can be found by starting with the beginning inventory, adding purchases and subtracting the cost of goods sold.

INVESTOPEDIA EXPLAINS 'Ending Inventory'

Normally the market value of inventory is higher than the cost, since the company expects to sell its goods at a profit. It is common, however, for a certain amount of inventory to go unsold or become outmoded and, thus, its expected market price may become lower than its initial cost. When this occurs, the company must write down the value of its inventory to more accurately reflect the value of the company's assets.

RELATED TERMS
  1. Average Age Of Inventory

    The average number of days it takes for a firm to sell to consumers ...
  2. Accounting

    The systematic and comprehensive recording of financial transactions ...
  3. Shrinkage

    The loss of inventory that can be attributed to factors including ...
  4. Periodic Inventory

    A method of inventory valuation for financial reporting purposes ...
  5. Inventory Turnover

    A ratio showing how many times a company's inventory is sold ...
  6. Book Value

    1. The value at which an asset is carried on a balance sheet. ...
RELATED FAQS
  1. How do I perform a financial analysis using Excel?

    Investors can use Excel to run technical calculations or produce fundamental accounting ratios. Corporations use Excel to ... Read Full Answer >>
  2. Which accounting cycle is best for my business?

    Most accounting resources suggest that there are between five and eight different accounting transaction cycles, each of ... Read Full Answer >>
  3. What are the pros and cons of using the fixed charge coverage ratio?

    One main advantage of using the fixed-charge coverage ratio is it provides a good, fundamental assessment for lenders or ... Read Full Answer >>
  4. What are the disadvantages of using the sinking fund method to depreciate an asset?

    Using the sinking fund depreciation definitely impinges on a company's cash flow and profitability during the depreciation ... Read Full Answer >>
  5. When do I need to project run rates for my business?

    A business might project a run rate if it needs to evaluate potential future outcomes. Common scenarios where a run rate ... Read Full Answer >>
  6. How does inventory accounting differ between GAAP and IFRS?

    There are three common methods for inventory accountability costs: weighted-average cost method; first in, first out, or ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Measuring Company Efficiency

    Three useful indicators for measuring a retail company's efficiency are its inventory turnaround times, its receivables and its collection period.
  2. Fundamental Analysis

    Inventory Valuation For Investors: FIFO And LIFO

    We go over these methods of calculating this component of the balance sheet, and how the choice affects the bottom line.
  3. Options & Futures

    Advanced Financial Statement Analysis

    Learn what it means to do your homework on a company's performance and reporting practices before investing.
  4. Investing

    Apple or Google: Which is the Better Bet?

    Apple and Google have made many investors rich since the turn of the century. Which is more appealing going forward?
  5. Economics

    What is Involved in Inventory Management?

    Inventory management refers to the theories, functions and management skills involved in controlling an inventory.
  6. Economics

    What are Noncurrent Assets?

    Noncurrent assets are property that a company owns that will last for more than one year.
  7. Investing Basics

    How Much Do CPAs Make?

    If you're considering becoming a CPA, here's what you might expect to earn.
  8. Fundamental Analysis

    How Microsoft & Apple's Balance Sheets Compare

    Looking at two iconic companies, Microsoft and Apple, whose balance is sheet is stronger and where?
  9. Economics

    Explaining Activity-Based Costing

    Activity-based costing (ABC) is a managerial accounting method that assigns certain indirect costs to the products incurring the bulk of those costs.
  10. Economics

    What is a Contra Account?

    A contra account is an offset that reduces the value of a related account.

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  3. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  5. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  6. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
Trading Center