Closing stock, also known as ending inventory, refers to the total value or quantity of goods and materials that a business has on hand at the end of a specific period, such as a month or year. This value is used in accounting and financial reporting as part of the calculation of cost of goods sold (COGS) and gross profit. The closing stock figure is determined by adding the beginning inventory, plus any purchases or production during the period, and subtracting any sales or other inventory usage during the period.
For example, a retail store starts the month of January with ₹ 10,000 of inventory on hand. During the month, the store purchases an additional ₹ 5,000 of inventory and sells ₹ 15,000 worth of merchandise. The store’s closing stock for the month of January would be calculated as follows:
- Beginning inventory (Jan 1st) = ₹ 10,000
- Purchases during the month = ₹ 5,000
- Ending Inventory (Jan 31st) = ₹ 10,000 + ₹ 5,000 – ₹ 15,000 = ₹ 0
so, in this example the store’s closing stock is 0Rs., it means that all the inventory they have is sold, and they don’t have any stock in the end of the month.
