Finished goods

Finished goods are products that have completed all aspects of the production process, and which are being held for sale.  Products still in the production process are classified as work-in-process inventory. Several characteristics of finished goods are as follows:

  • A company with a fast delivery strategy may need to keep a large amount of finished goods inventory in stock.

  • A company may want to minimize its finished goods inventory if the inventory has a short shelf life, and so is at risk of spoilage or obsolescence.

  • Finished goods are considered to have significant value as collateral for a lender, since they can be sold off with no delay for finishing work.

Goods that have been acquired for immediate resale without any value-added activities are considered to be merchandise, rather than finished goods. Thus, retailers have merchandise in stock, rather than finished goods.

Related Courses

Accounting for Inventory 
How to Audit Inventory