Inventory accounting

How do you account for unsold inventory in your books?

Unsold inventory generally is not treated as an expense yet; it often stays on your balance sheet until sold.

How inventory is handled

  • Inventory remains an asset until it’s sold.
  • Costs move to expenses only when items are sold.
  • Unsold items carry forward to future periods.

Why this matters

Expensing inventory too early can make your business look less profitable than it really is. Tracking what remains unsold keeps reports accurate and meaningful.

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Related resources

How do I track online vs. in-person sales together? How do you handle bookkeeping at year-end?

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