Finished Goods

This Current Assets code records finished goods. As an asset account, it normally carries a debit balance: debit entries increase the balance and credit entries decrease it.

Real-world examples

Manufacturing

For a manufacturer, Finished Goods is completed product ready for despatch — valued at full production cost (materials, labour and overhead absorbed), sitting on the balance sheet until it's sold and the cost is released to cost of sales. A furniture maker with £8,200 of completed units in the warehouse at month end holds that value here rather than in 1002 (Work in Progress), which is reserved for units still on the line.

Retail

A retailer buying goods ready-made for resale has no production process, so there's no meaningful distinction between "finished" and any other stage — everything bought in is already finished. Most retailers simply use 1001 (Stock) for the lot rather than posting anything to 1003, which effectively sits unused in their chart of accounts.

Drinks production

A brewer or distiller's finished goods can be tied up in bonded storage under duty suspension — product that's finished in every practical sense but can't yet be released for sale until duty is accounted for. That's a layer most manufacturers don't have to deal with: the stock value sitting in 1003 may include product still working its way through the duty system.

Commonly confused with

Because code 1002 (Work in Progress) sits right next to this one in Current Assets, it's a common mis-posting target. Code 1003 is specifically for finished goods, while 1002 covers work in progress — similar in nature, but keeping them separate is what makes the current assets section of your management accounts meaningful rather than a single lumped total.

What a mis-posting here costs you

Because Finished Goods sits within Current Assets, an error here overstates or understates working capital on the balance sheet rather than affecting reported profit — it won't move the bottom line, but it can make the business look more, or less, liquid than it actually is.

Other codes in Current Assets