Opening inventory calculator

3 min read
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The key to running a profitable business is maintaining organised accounts. Your income statements and balance sheets will tell you everything you need to know about the health of your business if you know what to look for. This includes the amount of inventory purchased and held. 

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What is opening inventory?

Opening inventory (or beginning inventory) is the monetary value of your inventory at the start of an accounting period. It represents all the goods you can use to generate revenue. Calculating opening inventory will help you gain a greater understanding of what inventory you hold. 

By calculating your beginning inventory, you can easily identify lost stock through theft, breakages, damages, or poor inventory management. You can also see changes in specific products or lines, which can help you adjust orders to meet customer demand. It's also a useful internal audit practice that forms part of a best practice for business accounting processes. 

How to calculate opening inventory

The first step to calculating opening inventory is using the records from the previous accounting period to determine the cost of goods sold (COGS). Then multiply the closing inventory balance by each item's production cost. 

Repeat the same using your new inventory amounts. Add the COGS and ending inventory (or closing inventory). To calculate the opening inventory, subtract the amount of your total inventory purchases from the result. 

While you can use the opening inventory calculator found above to simplify the process, it's always helpful to know the inventory formula if you need to handle calculations manually. 

Opening inventory - Cost of goods sole (COGS) + Ending inventory - Current period purchases

You can also use your opening inventory to calculate your average inventory, which is a good measure of your company's financial performance. You add your beginning and ending inventory and divide by two. Inventory turnover is used to determine how efficiently a company turns amounts of inventory into COGS. 

Use our Costs of Goods Sold calculator to quickly find your COGS.

How to use the calculator 

The calculator is simple to use. All you need to do is look at your inventory balance and input the correct facts and figures into the calculator and it will do the calculation for you. You will need your COGS, Ending Inventory, and Purchases.

How QuickBooks can help

Knowing your opening inventory, cost of goods sold and total purchases is really important for the running of your business. QuickBooks Inventory Management Software helps your business keep track of these numbers with real-time stock value tracking, low stock alerts, order tracking and more features. Visit our pricing page to view plans or try a free 30-day trial. 

Frequently Asked Questions

What is opening inventory and why is it important?

Opening inventory is the inventory value you carry from the previous period. Changes to your beginning inventory from period to period indicate a shift in the business. For example, a decrease could be due to an increase in sales. However, it may also be a supply chain issue. An increase could be due to a drop in sales, but it could also be a result of larger stock orders ahead of a busy period. Opening inventory is key to managing your business efficiently, and understanding both operational and sales trends.

What is classed as a purchase?

This depends on the type of business you operate. Typically, any raw materials or production inventory is classed as a purchase, just the same as the finished goods inventory you purchased from a supplier. For example, the former would be more likely for a manufacturing company, while the latter is generally a retail function.

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