Closing Inventory Calculator
Inventory Valuation Results
Opening Inventory-
+ Net Purchases-
= Goods Available for Sale-
- Cost of Goods Sold-
Closing Inventory-
Gross Profit-
Inventory Valuation Methods Compared
| Method | How It Works | Rising Prices | UK Accounting |
|---|---|---|---|
| FIFO | Oldest stock sold first | Higher closing value | Widely used, HMRC accepted |
| LIFO | Newest stock sold first | Lower closing value | Not IFRS compliant |
| Weighted Average | Average cost per unit | Middle ground | Common for homogeneous goods |
| Specific ID | Actual cost per item | Most accurate | Used for unique items |
Key Inventory Ratios
Inventory Turnover
COGS / Avg Inv
Days in Inventory
365 / Turnover
Gross Margin
(Rev-COGS)/Rev
How to Use This Calculator
1
Enter opening inventory
Input the value of inventory at the start of the period. This should match the closing inventory from the previous period.
2
Add purchases
Enter the total value of all inventory purchased during the period, before any returns.
3
Enter COGS
Input the Cost of Goods Sold for the period. This is the cost of inventory that was actually sold to customers.
4
Deduct purchase returns
If any purchased stock was returned to suppliers, enter the total value of returns.
5
Review closing inventory
The calculator shows closing inventory value, goods available for sale, and gross profit for the period.
Frequently Asked Questions
What is closing inventory?
Closing inventory is the value of unsold goods remaining at the end of an accounting period. The formula is: Closing Inventory = Opening Inventory + Purchases - Cost of Goods Sold. It appears as a current asset on the balance sheet and directly affects gross profit on the income statement.
Why does closing inventory matter?
Closing inventory directly affects two financial statements. On the income statement, a higher closing inventory means lower COGS and higher gross profit. On the balance sheet, it represents a current asset. Overstating inventory inflates profits; understating it reduces reported profits. HMRC pays close attention to inventory valuations.
What is FIFO and why is it preferred in the UK?
FIFO (First In, First Out) assumes the oldest inventory is sold first. In periods of rising prices, FIFO results in higher closing inventory values and higher reported profits. It is the most widely used method in the UK and is compliant with both UK GAAP (FRS 102) and IFRS (IAS 2). HMRC generally accepts FIFO.
Is LIFO allowed in the UK?
LIFO (Last In, First Out) is not permitted under IFRS or UK GAAP (FRS 102). While it is used in the US under US GAAP, UK companies must use FIFO, weighted average, or specific identification. HMRC does not accept LIFO for tax purposes in the UK.
How does HMRC value inventory for tax?
HMRC requires inventory to be valued at the lower of cost or net realisable value (NRV) for tax purposes, as per IAS 2 and FRS 102. Cost includes purchase price, import duties, transport, and directly attributable conversion costs. NRV is the estimated selling price less costs to complete and sell.
What is the impact of inventory write-downs?
When inventory's net realisable value falls below cost, businesses must write it down. This reduces closing inventory, increases COGS, and decreases profit. The write-down is tax-deductible. Common reasons include damage, obsolescence, or declining market prices. Write-downs should be reviewed each period.
Official Sources & References
Data verified against official UK government sources. Last checked April 2026.