Inventory, stock counts and cost of sales

Skills you'll practise

• Calculate cost of sales and gross profit from opening inventory, purchases and closing inventory
• Plan a stock count with count teams, recount rules and approval of adjustments
• Decide whether goods near the period end belong in closing inventory using stated terms
• Calculate closing inventory and cost of sales using FIFO and weighted average cost
• Explain how an error in closing inventory changes this period's and next period's profit
• Calculate inventory turnover from cost of sales and average inventory

Course outline

1. 1.Inventory, stock counts and cost of salesVideo · 2 min
2. 2.From stock to cost of salesLesson · 15 min
3. 3.Running a stock count you can trustLesson · 18 min
4. 4.Valuing inventory and checking the resultLesson · 18 min
5. 5.Inventory, stock counts and cost of sales: knowledge checkKnowledge check · 19 questions
6. 6.The year-end count is 4,800 shortScenario
7. 7.Final exam9 questions · passing it completes the course, so people who already know the material can test out

Sources it draws on

The lessons and questions are written from these references, so learners can go back to the original.

• IRS Publication 334, Tax Guide for Small Business, chapter 6: How To Figure Cost of Goods Sold (US example: beginning inventory + purchases and production costs − ending inventory)
• IRS Publication 538, Accounting Periods and Methods: Inventories (US example: FIFO and LIFO, consistent methods, physical counts)
• U.S. SEC: Beginners' Guide to Financial Statements (balance sheet, income statement, cash flow statement; working capital, debt-to-equity and inventory turnover)
• General bookkeeping practice (journals, ledgers, reconciliations, schedules, review and sign-off)