Opening Stock | Top Q&A

What is open stock?


Beginning inventory can be described as the initial quantity of any product/goods held by an organization during the beginning of any financial year or accounting period and is equal to The ending inventory for the prior period is valued on the basis of appropriate accounting standards, depending on the nature of the business.

Stocks that are open

Depending on the nature of an organization’s business, the types of inventory will also vary. For example, a merchant’s inventory will be different from that of a manufacturing organization or from a service organization. However, in their consolidated form, they can be divided into the following categories: You are free to use this image on your website, templates, etc., Please provide us with the attribution link.

  • Raw materials – Raw materials are the most basic form of inventory opening, i.e. raw materials that have not undergone any transformation. It is only purchased and stored for future use.
  • In process – For manufacturing industries, work in progress is one type of inventory Type of inventory Direct materials inventory, work in progress, and finished goods inventory are the three types of inventory. Raw materials is the direct materials inventory, the work in progress inventory is the partially finished inventory and the finished goods inventory is the finished all stages inventory of more more have undergone modification, conversion, conversion on a case-by-case basis but have not been fully processed. However, in order to sell at full market value, some processing is required.
  • Finished product – The end product of an organization to which it belongs. It is complete in every way, i.e. ready for sale.
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Formula to calculate open stocks

Depending on the variety of data available, it can be calculated on a different basis. Some of the formulas are presented below:#1 – When different types of stocks open are mentioned.#2 – When current year-end stock is given along with sales and COGS and gross profit Gross profit Gross profit shows the income of the business from its core business i.e. is the profit the company gets after deducting all direct costs like raw material cost, labor cost etc from the direct income generated from the sale of goods and the Other figures:

Example of opening a warehouse

Now let’s understand the following examples. Example #1 millionr. Mark, the shirt manufacturer, provides the following details on inventory as of January 1, 2019. Based on the available data, you are asked to calculate the opening value of the stock with the classification as RM, WIP, FG:

  • Raw Cotton: $5000
  • Subject: $2000
  • Color: $3000
  • Semi-closed shirt: $20,000
  • Shirt with stickers but no color: $15,000
  • Finished shirt: $48000

Note: Finished shirts are offered for sale with a gross profit margin of 20% on COGS.SolutionBased on available data, open stock will be calculated as follows:-Example 1.1Open inventory = 10000 + 35000 + 40000 = 85000Example #2Mark Inc., a fabric manufacturing industry, gives the following details. You must calculate the value of the stock opening on 01/01/2018:Open warehouse Example 2SolutionOpening shares will be calculated as follows:Example 2.1Opening Inventory = 1250000 – 800000 – 250000 – + 100000 = 100000


Some advantages are as follows:

  • Holding open stocks can help an organization meet fluctuating market demands and possibly meet customer demand.
  • It helps the organization to ensure better delivery/service to the customers and thus increases the customer satisfaction.
  • The efficient supply of raw materials ensures smooth operation without hindering production.
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Limitations of opening a warehouse

Holding shares open for sale has advantages but at the same time has many disadvantages as follows:-

  • Cost of holding inventory: Is the quantity of goods/materials backlog in the previous financial year. Holding inventory leads to increased costs like storage space rent, interest on money value of inventory, etc.
  • Danger of obsolescence: Holding inventory always carries the risk of obsolescence (inventory becoming obsolete, i.e. no longer in use) due to changing market conditions.
  • Risk of loss: An organization with an open inventory will also be at risk of loss due to damage, theft, etc.
  • Low turnover: A large opening inventory indicates the organization’s inability to sell its products and, therefore, may reflect poor financial reporting). These reports, including the Balance Sheet, Income Statement, Cash Flow and Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure consistency in accounting. Report at more.

Important point

  • According to the various revisions in the guidance, accounting assumptions, Accounting Standards, there are different changes taking place in the opening of the requirements for the calculation and disclosure of stock information.
  • Not only an agent or manufacturer, but now a service provider is also required to ensure proper accounting of open source goods. For example, a Certified Public Accountant / Certified Public Accountant is required to maintain records of inventory kept in the form of stationery such as pens, paper, etc.
  • Opening inventory valuation is important because it directly affects the bottom line of the organization.
  • Not only the product but the business organization but other assets such as spare parts and capitalized asset inventory are also declared as inventory;
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Opening inventory can be defined as a quantity of goods held by an organization at the beginning of any accounting period. This can be quarterly, semi-annually or annually, depending on the time period for which you want to create financial reports to present to investors so they can track and compare overall. more of the company. They can be classified into raw materials, work-in-process and finished products, etc… Based on the availability of data, the opening of the warehouse can be calculated with the help of different formulas. . Holding inventory helps an organization meet fluctuating customer needs, but there is also a cost to holding. Today, there are various modifications taking place in the calculation, accounting and disclosure of shares for sale.

Here is a guide to what is open stock and what it means. Here we discuss its formula, the opening 3 types of inventory (Materials, work in progress, finished goods) along with examples, advantages and disadvantages. You can learn more about accounting basics from the following articles:

  • Construction work in progress
  • Hold the price
  • Types of Phantom Stocks
  • Closed stock meaning
  • Record down the inventory

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Posts “Opening Stock | Top Q&A” posted by on 2021-08-13 18:28:04. Thank you for reading the article at

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