Inventory used between two counts: 3 figures

Stock used between two counts equals your beginning count plus purchases during the period, minus your ending count.

Key takeaways

Record beginning stock, purchases and ending stock in the same units.
Log deliveries when they arrive.
Track damage, samples, transfers and returns separately from sales.
Compare stock used with sales and investigate any gap.

Why two counts are not enough

You do not need special software or an accounting background. You need three figures, some simple arithmetic, and a habit of writing down what moves in and out. This post explains those figures, works through an example, and lists the checks to run when the result looks wrong.

The idea comes from basic inventory accounting, and it suits businesses that resell goods they did not make. A managerial accounting textbook describes merchandisers in these terms: "typical companies in the merchandising industry sell products they do not manufacture and purchase their inventory in an already completed state." ( textbook chapter) That describes businesses that buy finished goods for resale. You buy finished goods, hold them, and sell them. Because nothing is built in between, the flow of stock is simpler than a factory's, and the method fits well.

The three figures

The whole method rests on three numbers. Each one answers a different question.

Beginning count

Your beginning count is the amount of stock you had on hand at the start of the period. The period is whatever stretch sits between your two counts, whether that is a week, a month, or a season. Everything else builds on this figure.

To make it useful later, the beginning count needs to be reliable. Count the same way you will count at the end: same locations, same units, same order of counting. Record the date and time. If you count a shelf of cases one time and a shelf of single units the next, the figure will be off before you have sold anything.

Write it down somewhere you can find it later. A notebook, a spreadsheet, or a printed count sheet all work. The format matters less than being able to locate the number without digging through old papers.

Purchases

The second figure is everything that came into the stockroom during the period. For most shops, this means supplier deliveries, recorded as they arrive. The key is to be consistent about what counts as an addition, and to apply the same rule every period.

Record incoming stock from supplier invoices or delivery notes, using the date the goods were received rather than the date you paid. If an order arrived in two shipments, count each shipment. If goods arrived on the last day of the period but have not been entered yet, additions will be undercounted and the used figure will look too low. Check the receiving log against the invoices before you do the math.

Keep this figure separate from sales. Sales show what went out to customers. Purchases show what came in. Mixing them in one list makes it hard to see which number is wrong when something does not add up.

Ending count

The third figure is the stock you have on hand at the end of the period. It is the second count, taken the same way as the first, and it tells you what is left.

The ending count is where most errors hide. Counting while stock is still moving, with deliveries being unloaded or customers taking items off shelves, produces numbers that match nothing. Pick a time when you can count without interruption. Note any items that are on hold, in transit, damaged, or set aside for returns, and decide in advance how each category will be handled so that you treat it the same way both times.

For a count review, follow the physical inventory reconciliation steps.

How the figures fit together

Once you have the three figures, the arithmetic is short. Stock used equals what you started with plus what came in, minus what is left at the end. Written as a formula, it is Stock used = beginning count + purchases − ending count, where each term is one of the three figures described above.

The beginning count and purchases together make up everything you had available to sell during the period. Whatever remains at the end was not used, so the difference is what left the stockroom.

The textbook works through the same logic with dollar values. It says: "For example, if the beginning inventory balance were $400, and the company bought an additional $1,000, it would have $1,400 of inventory available for use." ( textbook chapter) The beginning balance and the purchases give you the total that was available.

It then subtracts the ending balance: "If the ending inventory balance were $500, the amount of inventory used during the period would be $900 ($400 + $1,000 = $1,400 – $500 = $900)." ( textbook chapter)

The pattern holds whatever you sell. Replace dollar values with unit counts, or with cost, and the steps stay the same. What changes is the need to keep one unit of measure across all three figures. Mixing cases and single units, or retail prices and cost prices, is one of the most common reasons the answer looks wrong.

The textbook also notes that the valuation of goods sold and of remaining inventory depends on the assumption "that the company did not sell 100% of the inventory that they had available for sale during a given period." ( textbook chapter) In a shop, you may have unsold units at the end of a period. Some stock may remain, which is why the ending count is not optional. Without it, you know what came in but not what happened to it.

Illustrative example with units

Suppose your beginning count is 100 units, deliveries add 20 units, and your ending count is 100 units. Your stock used is 100 + 20 − 100 = 20 units. These illustrative figures show why equal beginning and ending counts do not mean nothing was used.

Why your records matter more than your arithmetic

The formula is easy. The hard part is making sure the three inputs are right. A subtraction cannot correct a wrong input, so the real skill is keeping records that let you trust each figure.

The most useful habit is logging every movement, not just sales. Sales are often recorded automatically at the register. Other movements often are not. Stock might leave the stockroom for a display, go to another location, be used as samples, be damaged and thrown out, be returned to a supplier, or simply go missing. Each of these reduces what you have on hand, and each shows up as "used" in your calculation unless you account for it separately.

If you record only sales, the used figure will include things that were never sold. If you record only counts, you will not know why the number is off. Keep a short log listing the date, item, quantity, and reason for every movement that is not a normal sale. Then the used figure can be split into the part that sold and the part that went somewhere else.

Good records also help when someone asks questions. A manager reviewing the numbers, a partner checking stock, or an accountant preparing the books will want to see where each figure came from. A clear record of the three figures, with dates and sources, lets anyone retrace the calculation without guessing.

Checking the result

Once you have an answer, compare it with what you expected. Pull the sales report for the same period and compare units sold with stock used. Any gap needs to be explained by other movements or errors.

If the used figure is higher than sales, look for stock that left the building without a sale. Damage, theft, samples, internal use, and unrecorded transfers all push the used figure up. Check the damage log, the transfer records, and any notes from staff about items they took for display or testing.

If the used figure is lower than sales, look at the inputs. Purchases may be understated because a delivery was not logged. The beginning count may have been too low, or the ending count too high. Customer returns may be recorded as sales without a matching addition back to stock. Each of these shifts the answer in a predictable way, so you can test them one at a time.

Avoid treating the gap as a single mystery. Often it is several small problems that add together. Work through them in order: recount a sample of items, check the receiving log against invoices, and check returns against the register. Small checks are more useful than one large one because they show which step is wrong.

Keep the results of these checks in your records too. If one supplier's deliveries are often logged late, or one shelf is always counted wrong, you have found something to fix.

What the number does and does not tell you

The used figure is a summary. It tells you how much stock is gone between two counts, but not why. A gap of a few units could be a miscount, a late delivery, or theft. The arithmetic raises the question, and your records have to supply the answer.

Treat the used figure as a starting point for looking into stock, not as a verdict on any person or shelf. Most differences come from ordinary things: a delivery logged a day late, a return put back in the wrong place, a case opened and counted as single units. Spotting those patterns helps you fix the process, which is more useful than blaming whoever did the count.

The period you choose also shapes the result. A short period catches more day-to-day movements, but each count takes time, so frequent counts can be hard to keep accurate. A longer period is less work, but it can hide problems that would have shown up sooner. Pick a length that suits how often you can count, and keep it steady so results can be compared from one period to the next.

Finally, the used figure measures what moved, not how well the shop is doing. Stock used describes flow. Whether that flow made money depends on prices, costs, and how much stock sat unsold, which is a separate question.

Common mistakes to avoid

A few mistakes come up again and again.

Counting at different times of the day. If the first count happens before lunch and the second after a busy rush, the used figure will include stock that moved in ways the record does not show. Pick a consistent time, and where possible pause deliveries and returns while you count.

Mixing units. A shelf of cases is not the same as a shelf of single units unless you convert the cases first. Decide on one unit of measure before you start, and write it at the top of the count sheet.

Forgetting returns. A customer brings an item back and you put it on the shelf again. That is a movement, and it changes the used figure. Record returns separately from sales so you can see them. Use the refund checks before restocking when reviewing these movements.

Counting in the wrong place. Stock in the back room, on the loading dock, or in a second location belongs in the count if it belongs to you. Decide where the count boundary sits and stick to it every time.

Letting the method drift. If you count a little differently each time, errors add up and make every period harder to compare. A short written procedure, even one page, keeps the method steady.

A simple routine

You do not need a complicated system. This routine works for many shops:

Count the stock and record the beginning count with the date and unit of measure.
During the period, log every delivery as it arrives, with the arrival date and quantity.
Log every movement that is not a normal sale, such as damage, samples, transfers, or returns.
Count the stock again at the end of the period, using the same method as the first count.
Calculate stock used: beginning count plus purchases, minus ending count.
Compare the result with sales for the same period, and investigate any gap.

The first period often takes the longest because you are setting up records. After that, the steps are mostly routine.

If your shop uses a point-of-sale system or inventory software, it may already track sales and deliveries. Even then, the three-figure method is a useful check. Software can record movements, but it cannot tell you whether the physical count matches the system. Comparing the two is how you find errors the system would otherwise hide.

Working with cost and value

Units tell you how much stock moved. Cost tells you what that movement was worth. Many shops care about both, especially when they need the value of stock sold or still on hand.

The textbook example uses dollars. The same formula gives you the cost of stock used if you value each figure at cost. Keep one valuation method for the whole period. If you value the beginning count at purchase cost and the ending count at retail price, the result will mean very little, because the figures sit on different bases.

If costs change during the period, because a supplier raised prices or a delivery arrived at a different price, note the change. You may need to decide how to value the stock that remains. Whatever you choose, apply it the same way every period. If you are unsure which approach fits your business, ask an accountant before changing anything.

Keep unit counts and dollar values separate in your records. Units describe the physical stock. Dollars describe money. Both are useful, but they answer different questions, and mixing them on one line makes both harder to read.

Making the method work for your team

The method is only as good as the people who carry it out. Staff who count stock, receive deliveries, and log movements need to understand why each figure matters. When they know that an unlogged delivery makes the used figure look too low, they are more likely to log deliveries on the day they arrive.

Keep the instructions short. A one-page sheet with the steps, the unit of measure, the count time, and the rules for holds and returns is enough for most teams. Walk through it with new staff, and update it whenever the process changes.

Review the results together. Show the team the beginning count, the purchases, the ending count, and the used figure, then talk through any gap. Many errors are simple once someone explains the process, and the team learns more from discussing them than from a memo.

Your next count

Today, choose the stock you will count and write down the date, the unit of measure, and the total. Keep a simple log until the next count, and see how close the answer comes to what you expected.

Common questions

Does stock used mean stock sold?

Stock used includes sales and other stock movements, so it does not necessarily equal stock sold. Use your movement log to explain the difference.

Can I use dollar values instead of units?

You can calculate the cost of stock used by valuing all three figures at cost. Keep unit counts separate from dollar values.