Under a manufacturer system - how do you compute finish goods inventory?

How do you compute finished goods inventory under a manufacturer system.

It depends on what type of information you have available to you.

Just in general terms, finding the balance of the inventory is simply balancing the account, which is the same for all accounts. If you can balance a cash account, you can balance the finished goods account.

However, for some problems, you are getting a lot of other information going on that makes it not so obvious what is going on in that account. If you don't know what's going on, then it's difficult to balance it. So what I think you really need to know is what happens in that account.

Finished Goods is like Merchandise Inventory if you remember that. It's an asset, so a debit account. You could have a beginning balance from the prior period. What goes into that account is called "cost of goods manufactured." (COGM) That will be coming from the WIP account, the amount that got completed during that period and moved into finished goods.

What comes out of that account is what got sold. That amount comes out and goes down into the cost of goods sold account. (That part is like merchandising.)

So you add COGM and subtract what was sold, and you have your ending balance.

If you have one of those problems that's giving various and sundry numbers and making you work backwards into something, then you can make yourself a little t account, insert what you know, and work backwards into what you don't know.