Closing inventory
Closing inventory is inventory remaining at the end of the reporting period. It is reported as an asset at the lower of cost and net realisable value. In a simple periodic trading calculation, subtract closing inventory from goods available for sale to calculate cost of sales. The same amount must be consistent between the profit calculation and the statement of financial position.
Worked example
Goods available for sale cost $40,000. Inventory remaining has cost $7,000 and net realisable value $6,400. Closing inventory is $6,400 and cost of sales is $33,600, including the $600 write-down.
Common mistake
An overstated closing inventory understates cost of sales and overstates profit and assets. A physical count alone does not determine the correct valuation.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | F1 | Direct | July 2027–August 2028 |
| ACCA | F2 | Direct | July 2027–August 2028 |
| ACCA | F3 | Direct | July 2027–August 2028 |
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | K1 | Direct | July 2027–August 2028 |
| CIMA | BA3 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |
Related terms
Also called: closing stock