equation for ending inventory

equation for ending inventory is used in accounting and supply chain management to calculate the value of unsold goods at the end of an accounting period. The basic formula is: Ending Inventory = Beginning Inventory + Purchases – Cost of Goods Sold (COGS). This equation helps businesses assess their inventory turnover rate, optimize purchasing decisions, and prepare accurate financial statements. Proper calculation of ending inventory ensures correct tax reporting and profitability analysis. Businesses may use periodic or perpetual inventory systems to track inventory levels. For e-commerce and fulfillment centers, software automation often assists in calculating ending inventory in real-time. Miscalculations can result in overstock, understock, or financial discrepancies. The ending inventory equation is crucial for maintaining a healthy balance sheet and ensuring smooth operational planning in logistics and retail sectors.