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# Beginning Inventory Calculator

The Beginning Inventory Calculator allows you to calculate the value of all inventory held at the start of the accounting period, this represents thevalue of stock/goods that can be used to generate revenue via sales for the period used.

 Cost of goods sold Purchases Ending inventory
 Beginning inventory

## Why do I need to know the Beginning Inventory?

Calculating the Beginning Inventory allows you to identify / confirm inventory change for defined accounting periods to understand shifts in stock inventory on specific lines which in turn:

• Identifies any lost stock (breakages, pilfering, damages, unaccounted returns, poor inventory management).
• Increases / decreases in specific products / lines, particularly useful for ensuring sufficient stock to meet customer demand (see Available to Promise for more information).
• Supply Chain issues (Push / Pull Available To Promise (ATP) process / execution problems)
• Inventory Management process issues (unnecessary delays in accounting for returns / processing data for stock control etc.
• Internal Audit - drives good internal process practice and helps to identify, resolve and sustain good business accounting/business process procedure

## Beginning Inventory: Measure the Health of Inventory Management of Your Business

Monitoring inventory is vital for effectively managing accounts of your business. It plays a major role in maintaining profitability of your business. Inventory in general is an important asset on your balance sheet as it provides the basis for your business's operation and goals.

Beginning inventory can be defined as a cash value of a company's inventory at the beginning of a new accounting period; also, the carried forward value from the end of the preceding accounting period.

## Basics of Beginning Inventory

Beginning inventory is an asset account, classified as a current asset. Even though technically, the beginning inventory does not appear on the balance sheet, it exists in the form of ending inventory that appears at the beginning of a balance sheet.

Beginning inventory is a combination of both goods that are used in production and goods that are ready for sale. It is an asset that can be potentially used as collateral for borrowings as it can be taken over by the bank in case of non-repayment or a default.

Managing inventory by cost and units is important for operations efficiency. It is done by managing inventory operations and units of inventory, maintaining cost records, monitoring the movement of inventory, and preventing inventory frauds.

### Inventory Performance Methods That Are Affected By Beginning Inventory

Cost of Goods Sold: The primary use of beginning inventory is to serve as the basis of cost of goods sold (COGS), this is the value that defines the total production cost for each unit that a company spends on producing the goods.

Companies seek the highest possible price and the lowest cost of goods sold to gain the greatest profits possible. The beginning inventory works a key component for COGS. It is identified using the following formula:

COGS = Beginning inventory + Inventory purchases during the period - Ending inventory
• Average inventory: Beginning inventory is also used to calculate average inventory. The average inventory is a measure of financial performance of a company. This is calculated by adding beginning inventory to ending inventory and dividing the obtained value by two. The average inventory further affects the inventory days and inventory turnover. Let's have a look at the two measures.
• Inventory days: Day's sales of inventory of inventory days define the number of days it takes a company to turn its inventory into sales. The lower inventory days show the better efficiency of a company's selling capacity and vice-versa. This is calculated using the inventory days formula.
• Inventory turnover: This measure is used to determine a company's efficiency to turn its inventory into COGS. It is calculated by dividing the total sales by average inventory. An alternative method uses COGS instead of total sales. Inventory turnover shows how many times a company has sold its inventory in a given accounting period.

### Inventory Days Formula

Inventory days = (average inventory / COGS) x Number of days in a period

## Using the Calculator For Your Company's Beginning Inventory

Using the Beginning Inventory calculator can be quite useful for you to do proper record keeping. Calculating the beginning inventory will make you aware about the importance of proper record keeping for better financial management. The beginning inventory will also show you the value of products that are readily available for sale. This will help you make decisions about the future production needs, thus enabling you to plan ahead for greater profits. And, lastly, you can use the results obtained from the calculator to assess the financial health of a company with other metrics, such as inventory days, average inventory and inventory turnover.

The calculator designed by iCalculator performs calculations for you with just a few clicks, it is online and very easy to use. It works on the basis of the following formula:

Beginning Inventory = Cost of Goods Sold + Ending Inventory - Purchases

You have to enter the following details into the calculator to start using it.

• Cost of goods sold: This is a cash value that can be calculated by multiplying the cost of produced goods by number of units sold in the previous accounting period.
• Purchases: Enter the value of purchases made, this can be any purchases added to the inventory during the preceding accounting period.
• Ending inventory: Enter the cash value of the stock left on the shelves at the end of the accounting period.

On the basis of the above mentioned inputs you will get the value of your beginning inventory in less than a second. Try it yourself and see how effortless it is to calculate beginning inventory using this simple online tool.