What does beginning inventory refer to?

Beginning inventory refers to the inventory that a company carries over from the end of one accounting period to the beginning of the next. This amount represents the stock of goods that was available for sale at the start of a new accounting period and is crucial for calculating the cost of goods sold (COGS) along with purchases made throughout the period and the ending inventory.

The significance of beginning inventory lies in its role in inventory management and financial reporting. It provides a starting point for assessing the changes in inventory levels over time, which is essential for understanding a company's sales activity and profitability.

Understanding the distinction between beginning inventory and other related terms can clarify its definition further. For instance, inventory at the end of the accounting period would refer to what remains unsold and is not considered beginning inventory for the next period. New purchases made during the period are additions to inventory but do not affect the definition of what constitutes beginning inventory. Similarly, future planned inventory for sales has no bearing on the current accounting period's beginning inventory.