2017-04-05 00:00:00BookkeepingEnglishUnearth the importance of tracking finished goods inventory, how it differs from other inventory accounts, and how it is reported on your...https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/06/employee-inventories-finished-goods.jpgFinished Goods Inventory

Finished Goods Inventory

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Finished goods inventory is a balance sheet account that reports the total amount of goods you own that are ready to be sold. You should use this financial reporting account if you have inventory in different stages of production. If you make your own products, you should consider using a raw materials account to report inventory you haven’t yet started, a work in process account for inventory you’ve started making, and a finished goods inventory account for inventory completed. Finished goods inventory is listed as a current asset on your balance sheet and is considered a short-term asset for tax purposes. It is important to track your finished goods inventory so you can plan for the future. If you have a trade show or market to sell at, you need to know how many finished products you will be able to offer. You can research your finished goods inventory to see what items are obsolete, what items need more physical security from theft, and if you have enough warehouse space. It is also important to know your finished goods inventory in case you have a cash crisis. Your finished goods inventory includes highly liquid assets that are easier to sell than raw materials or work in process. Knowing you have $25,000 of finished inventory and $15,000 of raw materials is substantially different than having $40,000 of general inventory. If you sell products, list your finished goods inventory separate for financial reporting, business planning, and tax purposes.

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Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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