How To Calculate The Sum of Ending Inventory And Cost of Goods Sold

Closing / Ending Inventory Plus (+) Cost of Goods Sold Equal To (=) | Calculation of The Sum of Closing Inventory And Cost of Goods Sold (Cost of Sales)

Here, we are concerned with the calculation of the sum of ending inventory / stock and Cost of Goods Sold / Cost of Sales with the help of a simple example. Ending Inventory is the unsold goods remain unsold at the end of current accounting period. At the beginning of the next accounting period, purchases of goods are made and the remaining goods which are not sold or returned by the customers is ending inventory. Purchases is related to goods purchased during the accounting cycle.

Example: We are given Opening Inventory = Rs. 5000, Purchases = Rs. 8000, Closing Inventory = Rs. 3000. Cost of Sales = ?

First of all, we calculate cost of goods sold and then the sum of cost of sales and closing inventory.

As, we know that:

                      Cost of Goods Sold = Opening Inventory + Purchases - Closing Inventory

                                                       = 5000 + 8000 - 3000

                                                       = Rs. 10000

Now, we will find out the Cost of Sales + Ending Inventory as shown below:

                  Cost of Goods Sold + Closing Inventory = Opening Inventory + Purchases

Putting the values, we have:

                                                      10000 + 3000 = 5000 + 8000

                                                            Rs. 13000 = Rs. 13000

Hence, it is proved that:-

                  Cost of Sales + Ending Inventory = Beginning Inventory + Purchases