Inventory & logistics
Ending Inventory Formula: Reconcile a Cost Rollforward
The ending inventory formula in a simple cost rollforward is beginning inventory + net purchases − cost of goods sold. Its usefulness depends on consistent amounts and a complete set of relevant movements. This original exercise supplies those assumptions so you can practice both the calculation and the reconciliation.
Define the cost model
Use one fictional merchandise group over one month. All figures are currency amounts at cost. There is no production, freight, shrinkage, write-down or other movement in this model. The stated purchase return reduces purchases; it is not an additional sale.
Original source summary
Beginning inventory cost: 7,000.
Purchases before the stated return: 5,500.
Purchase return at cost: 500.
Cost of goods sold for the month: 8,400.
Worksheet reports ending inventory cost: 3,900.
Calculate the supported ending balance
Net purchases are 5,500 − 500 = 5,000. Goods available at cost are 7,000 + 5,000 = 12,000. Removing the stated 8,400 cost of goods sold leaves 3,600.
The reported 3,900 exceeds the rollforward result by 300. That is a discrepancy to investigate, not evidence that a particular purchase or sale is wrong. The calculation is conditional on the source summary being complete and correctly measured.
Check the same relationship in reverse
Rearranging the formula is a useful arithmetic check: beginning inventory = ending inventory + cost of goods sold − net purchases. Using the calculated ending balance gives 3,600 + 8,400 − 5,000 = 7,000.
If you instead insert the reported 3,900, the implied beginning balance becomes 7,300. That does not justify changing the verified 7,000 opening figure. It identifies which relationship fails and helps you ask for the supporting schedule.
Report the exception with a useful next step
Keep the given figures and your derived figure separate. Ask for a reconciliation of the 300 difference and trace any proposed missing movement to its source before accepting it.
Original practice response
“The supplied cost movements support ending inventory of 3,600. The worksheet reports 3,900, a 300 excess. I would check the opening schedule, net purchase support and COGS calculation, then document any supported additional movement rather than insert an unexplained balancing amount.”
Avoid mixing cost, revenue and quantities
Sales revenue cannot replace the supplied cost of goods sold in this equation. A sales price includes a different measurement basis. Likewise, 20 units cannot be added directly to 5,000 currency units.
OpenStax explains periodic inventory cost calculations. This exercise is a reconciliation using supplied COGS; it does not determine a real valuation policy or prove the physical count. For another practice round, add an explicitly supported 200 cost purchase and recalculate ending inventory as 3,800, leaving the original 3,900 report 100 higher.
Questions, answered
Can I subtract sales revenue instead of COGS?
No. This rollforward uses cost figures throughout, so it subtracts the cost assigned to sold goods.
Does a matching formula verify the physical inventory?
No. Arithmetic agreement does not establish whether the source movements or physical quantities are complete and accurate.
Sources and examples
ResumizeAI team. Examples are fictional teaching material, not customer results. Replace sample details with your own facts.
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