What is inventory change and how is it measured? Inventory change is the difference between last periods ending inventory and the current periods ending inventory. If last periods ending inventory was $100,000 and the current periods ending inventory is $115,000, the inventory change is an increase of $15,000. The inventory change is often presented as an adjustment to purchases in the calculation of the cost of goods sold. If purchases were $300,000 during the current period and the inventory amounts are those listed above, the cost of goods sold is $285,000. (Purchases of $300,000 minus the $15,000 increase in inventory. The logic is that not all $300,000 of purchases should be matched against sales, because $15,000 of the purchases went into inventory.) This is an alternative to the method used in introductory accounting: beginning inventory of $100,000 + purchases of $300,000 = $400,000 of cost of goods available – ending inventory of $115,000 = cost of goods sold of $285,000. If last periods ending inventory was $100,000 and the current periods ending inventory is $93,000, the inventory change is a decrease of $7,000. Assuming purchases of $300,000 in the current period, the cost of goods sold is $307,000 ($300,000 of purchases plus the $7,000 decrease in inventory).
Posted on: Thu, 25 Dec 2014 10:59:47 +0000
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