Inventory: debit or credit?
Inventory increases on the debit side and decreases on the credit side: its normal balance is a debit.
Assets are resources the business controls. They increase with a debit.
Name in each convention
Account names and codes follow each convention; an account that does not exist in a convention is not offered there.
| Convention | Account |
|---|---|
| United States (US textbooks) | Inventory |
| Spain (PGC 2007) | 300 Mercaderías |
| France (PCG 2025) | 37 Stocks de marchandises |
| Germany (generic accounts) | Waren (Bestand) |
Practice entries that use this account
- Owner takes goods from stock for personal use
- Buying merchandise for cash
- Buying two lines of merchandise on account
- Buying merchandise, paying part in cash and the rest on account
- Returning part of a purchase on account
- Paying freight on purchased merchandise
- Buying merchandise with a trade discount
- Buying merchandise on account
- Returning merchandise bought on account
- Buying merchandise with a cash discount on the invoice
- Cash sale with cost of goods sold (perpetual inventory)
- Sale on account with cost of goods sold
- Customer returns goods for a cash refund, restocked (perpetual inventory)
- Selling merchandise on account with sales tax
- Cash sales with sales tax included in the total
- Sale paid partly in cash, partly on account
- Recording inventory shrinkage at year end
- Recording the month’s cost of goods sold in one entry
- Period-end cost of goods sold under the periodic system
- Writing inventory down to net realizable value
- Using goods from stock as office supplies
- Returning damaged goods for a cash refund
- Purchase discount taken, reducing inventory
- Recording an inventory count surplus
- Donating goods to a charity
- Transferring unsold purchases to inventory at year end