Ending Inventory Calculator
Use this calculator to find the value of stock remaining at the end of an accounting period. Choose between the accounting-identity method (beginning inventory plus purchases minus cost of goods sold), FIFO, LIFO, or weighted average cost. You get the ending inventory value, inventory turnover ratio, and a full worked breakdown of the math.
What is ending inventory and why does it matter?
Ending inventory is the total value of unsold goods a business holds at the close of an accounting period, such as the end of a month, quarter, or financial year. It appears on the balance sheet as a current asset and feeds directly into the cost of goods sold (COGS) calculation for the next period, where it becomes the opening or beginning inventory. Getting the number right matters for two reasons: it affects reported profit (a higher ending inventory figure reduces COGS and raises gross profit), and it affects the balance sheet value of stock the business actually holds. Accurate ending inventory is therefore central to financial reporting, tax filings, and management decisions about purchasing and production.
The four calculation methods: which one should you use?
The accounting identity method (Ending Inventory = Beginning Inventory + Net Purchases - COGS) is the fastest when you already know COGS from your income statement. FIFO assumes the oldest units are sold first, which matches the physical flow of perishable or dated goods and tends to produce a lower COGS and higher ending-inventory value when prices are rising. LIFO assumes the newest (most expensive) units are sold first, raising COGS and reducing taxable income during inflationary periods; note that LIFO is not permitted under IFRS and is mainly used in the United States. The weighted average cost method divides total cost by total units to get a single blended rate, smoothing out price swings, which is ideal for bulk commodities or interchangeable items. Under the same inputs, FIFO gives the highest ending inventory and LIFO gives the lowest when purchase prices are rising.
Inventory turnover and what it tells you
Inventory turnover equals COGS divided by average inventory ((beginning inventory plus ending inventory) divided by 2). It tells you how many times your entire stock was sold and replaced in the period. A turnover of 4 means stock cycled four times in the year, or roughly once every three months. Turnover benchmarks vary enormously by industry: grocery stores often exceed 15, while luxury goods retailers may see 1 to 3. A rising turnover generally means stronger sales relative to stock held, which improves cash flow. A falling turnover can mean slow sales, over-purchasing, or obsolete stock building up. Pair turnover with the days-inventory-outstanding figure (365 divided by turnover) to express it in days rather than turns.
Gross profit method and retail method (estimation approaches)
When a physical count is impractical, two estimation methods are commonly used. The gross profit method applies a known historical gross margin percentage to estimate COGS, then subtracts from goods available. For example, if beginning inventory is $50,000, purchases are $30,000, and the gross margin is 40%, estimated COGS is $48,000 and ending inventory is $32,000. The retail method converts a retail-price inventory count back to cost using the cost-to-retail ratio. If goods available at cost are $60,000 and at retail are $100,000, the ratio is 60%; if the ending retail count is $20,000, ending inventory at cost is $12,000. Both methods are acceptable for interim reporting but a physical count is required for year-end financial statements.
Inventory turnover benchmarks by industry
| Industry | Typical turnover range | Notes |
|---|---|---|
| Grocery / food retail | 12 - 30x | Perishables drive very high turnover |
| Fast fashion retail | 4 - 10x | Seasonal inventory cycles |
| General retail | 3 - 8x | Wide range by product type |
| Wholesale / distribution | 6 - 12x | Lean margins reward fast turns |
| Manufacturing | 4 - 10x | Depends on production lead times |
| Consumer electronics | 5 - 12x | Short product life cycles |
| Pharmaceuticals | 3 - 6x | Regulatory requirements affect holding |
| Automotive parts | 2 - 5x | Long shelf life, high SKU count |
| Luxury goods | 1 - 3x | Deliberate scarcity can be intentional |
Typical inventory turnover ratios by sector. Higher is generally better, but extremes in either direction can signal problems.
Frequently asked questions
What is the basic formula for ending inventory?
Ending Inventory = Beginning Inventory + Net Purchases - Cost of Goods Sold. Beginning inventory is last period's closing figure; net purchases includes all stock bought during the period minus returns; COGS is the cost of what was actually sold. This formula works regardless of the costing method, since each method simply determines how COGS is calculated.
Does FIFO or LIFO give a higher ending inventory?
When prices are rising, FIFO gives a higher ending inventory value because the older (cheaper) units are assigned to COGS first, leaving the newer (more expensive) units in closing stock. LIFO does the reverse, assigning the newest and most expensive units to COGS, so the remaining stock is valued at older, lower costs. The difference narrows when prices are stable.
Is LIFO allowed under international accounting standards?
No. LIFO is prohibited under International Financial Reporting Standards (IFRS), which are used in more than 140 countries. It is still permitted under US GAAP. Businesses that report under IFRS must use FIFO or weighted average cost.
What is inventory turnover and what is a good ratio?
Inventory turnover is COGS divided by average inventory for the period. A higher ratio means stock is sold and replaced more frequently, which is usually efficient. Benchmarks vary by industry: grocery stores often see 15 or more, general retailers aim for 4 to 8, and slower-moving sectors like automotive parts or luxury goods may see 2 to 4. Compare your ratio to industry norms rather than a universal target.
What happens if ending inventory is negative?
A negative ending inventory figure means COGS exceeds goods available for sale, which is mathematically impossible in a real business. It almost always signals a data error: incorrect beginning inventory, missed purchase records, or a COGS figure pulled from a different period. Check each input figure and reconcile against purchase invoices and stock records.
How do I record ending inventory on the balance sheet?
Ending inventory is recorded as a current asset on the balance sheet, typically under the heading "Inventories" or "Stock." The exact line depends on whether you split it into raw materials, work-in-process, and finished goods. The same figure automatically becomes the beginning inventory for the next period.
What is the difference between ending inventory and COGS?
Ending inventory is what remains unsold at period close, while COGS is the cost of what was sold during the period. Together they account for all goods available: goods available for sale = COGS + ending inventory. Ending inventory sits on the balance sheet; COGS is an expense on the income statement.