Cost of goods sold inventory at beginning of year

Your beginning inventory is the cost of the goods you had available at the end of the previous year. If you started your business in the current year, your beginning inventory would be $0. Purchases are the cost of the goods you purchased during the year that you intended to sell. The ending inventory is the cost of goods on hand at the end of the year that you haven't sold. TurboTax will add the cost of your beginning inventory to your purchases and subtract your ending inventory to arrive at your cost of goods sold.

Also, if the value of your items in inventory falls below what you paid for them, you can reduce the cost of them for inclusion in the ending inventory figure to their lower market value.