Finished goods

(noun)

Goods that are completed, from a manufacturing standpoint, but not yet sold or distributed to the end-user.

Related Terms

Examples of Finished goods in the following topics:

  • Categories of Goods Included in Inventory

    • Most manufacturing organizations usually divide their "goods for sale" inventory into raw materials, work in process, and finished goods.
    • It may also include finished cans that are not yet packaged into cartons or pallets.
    • Work in process or work in progress (WIP) - Materials and components that have began their transformation to finished goods.
    • Returned goods that are salable.
    • Distinguish between the raw materials, work in process, finished goods and goods for resale

  • Nature of Inventory

    • Inventory represents finished and unfinished goods which have not yet been sold by a company.
    • It may also include finished cans that are not yet packaged into cartons or pallets.
    • Its finished good inventory consists of all the filled and labeled cans of food in its warehouse that it has manufactured and wishes to sell to food distributors (wholesalers), to grocery stores (retailers), and even perhaps to consumers through arrangements like factory stores and outlet centers.
    • Inventory represents finished and unfinished goods which have not yet been sold by a company. .
    • Work in process, WIP - materials and components that have began their transformation to finished goods.

  • Internal Controls

    • Inventory internal controls ensure that a company has sufficient resources to meet its customers' needs without having too much goods.
    • Internal controls over a company's inventory are meant to ensure that management has an accurate count of what materials and goods it has available for sale and to protect those goods from being spoiled, stolen or otherwise made unavailable for sale.
    • Goods and resources of the same or similar type should be kept in the same general area of the warehouse to minimize confusion and to ensure accurate counts.
    • As the material is processed into the goods for resale, the amount of raw material used should be deducted from the "raw material inventory" and the amount of goods that result from the process should be added to the "finished goods inventory. " As each finished item is sold, the "finished goods inventory" should be decreased by that amount.
    • Physical inventory counts are a way of ensuring that a company's inventory management system is accurate and as a check to make sure goods are not being lost or stolen.

  • Flow of Inventory Costs

    • It may also include finished cans that are not yet packaged into cartons or pallets.
    • Its finished goods inventory consists of all the filled and labeled cans of food in its warehouse that it has manufactured and wishes to sell to food distributors (wholesalers), to grocery stores (retailers), and even perhaps to consumers through arrangements like factory stores and outlet centers.
    • FIFO (+) Higher value of inventory (-) Lower cost of goods sold
    • LIFO (-) Lower value of inventory (+) Higher cost of goods sold
    • FIFO (-) Lower value of inventory (+) Higher cost of goods sold

  • Costing Methods Overview

    • Note that a manufacturing business's inventory will consist of work in process, or unfinished goods, and finished inventory; the costs of unfinished and finished inventory contain a combination of costs related to raw materials, labor, and overhead.
    • On the other hand, a retailer's inventory consists of all finished products purchased from a wholesaler or manufacturer; the costs of their units are based on their acquisition cost rather than the costs associated with manufacturing units.
    • The FIFO (first-in, first-out) method of inventory costing assumes that the costs of the first goods purchased are those charged to cost of goods sold when the company actually sells goods.
    • This method assumes the first goods purchased are the first goods sold.
    • The LIFO (last-in, first-out) method of inventory costing assumes that the costs of the most recent purchases are the first costs charged to cost of goods sold when the company actually sells the goods.

  • Cost of Goods Sold and Gross Profit

    • Cost of goods sold refers to the inventory costs of the goods a business has sold during a particular period.
    • Costs of goods made by the business include material, labor, and allocated overhead.
    • Many businesses sell goods that they have bought or produced.
    • When the goods are bought or produced, the costs associated with such goods are capitalized as part of inventory (or stock) of goods.
    • Explain the difference between cost of goods sold and gross profit

  • Recognition of Revenue at Point of Sale or Delivery

    • Companies can recognize revenue at point of sale if it is also the date of delivery or if the buyer takes immediate ownership of the goods.
    • Goods sold, especially retail goods, typically earn and recognize revenue at point of sale, which can also be the date of delivery if the buyer takes immediate ownership of the merchandise purchased.
    • When the transfer of ownership of goods sold is not immediate and delivery of the goods is required, the shipping terms of the sale dictate when revenue is recognized.
    • For goods shipped under FOB destination, ownership passes to the buyer when the goods arrive at the buyer's receiving dock; at this point, the seller has completed the sales transaction and revenue has been earned and is recorded.
    • If the shipping terms are FOB shipping point, ownership passes to the buyer when the goods leave the seller's shipping dock, thus the sale of the goods is complete and the seller can recognize the earned revenue.

  • Cost Flow Assumptions

    • ., FIFO) are necessary to determine the cost of goods sold and ending inventory.
    • FIFO assigns first costs incurred to COGS (cost of goods sold) on the income statement.
    • Companies make certain assumptions about which goods are sold and which goods remain in inventory (resulting in different accounting methodologies).
    • The only requirement, regardless of method is that: The total cost of goods sold plus the cost of the goods remaining in the ending inventory for financial and tax purposes is equal to the actual cost of goods available.
    • Underestimates or overestimates cost of goods sold if prices are falling or rising, respectively and cost flow disagrees with ideal, physical flow of goods, though the agreement of cost flow and ideal, physical flow of goods is arguably not important

  • Bonds Issued at a Premium

    • The resulting journal entry is: Bond Interest Expense $5,000 Bond Premium $1,000 Cash $6,000When the bond reaches maturity, the company must pay the bondholder the face value of the bond, finish amortizing the premium, and pay any remaining interest obligations.
    • When the bond reaches maturity, the company must pay the bondholder the face value of the bond, finish amortizing the premium, and pay any remaining interest obligations.

  • Reporting Inventories

    • In a business accounting context, the word inventory is used to describe the goods and materials that a business holds for the ultimate purpose of resale.
    • A physical inventory must be taken at the end of the year to determine the cost of goods.
    • Regardless of what inventory accounting system is used, it is good practice to perform a physical inventory at least once a year.
    • However, the change in inventory is a component of in the calculation of cost of goods sold, which is reported on the income statement.
    • Depending on the format of the income statement it may show the calculation of Cost of Goods Sold as Beginning Inventory + Net Purchases = Goods Available – Ending Inventory.