Definition of finished goods inventory

amount of manufactured product on hand that awaits sale to customers. Finished goods inventory represents a current asset in the balance sheet. The income statement shows both beginning finished goods and ending finished goods only if cost of goods sold is calculated. When goods that were in process are completed, the entry is to debit finished goods and credit work-inprocess. When merchandise is sold, the entry is to debit cost of goods sold and credit finished goods. The difference between the sales and cost of goods sold is the gross profit.