I have a beginning inv. of 50000 purchase 100000 trial balance shows 75000 sold my ending inv. shoould be 75000. when i take inv. i get 85000 which one is correct

[DianeW · Accepted solution]

The ending inventory is your actual cost of all products purchased for resale that are sitting on the shelf, not yet sold, as of December 31, 2016.  If you take a physical inventory of the items and the amount you paid for it (do not use retail value) this is your ending inventory figure.

The purpose of inventory and/or cost of goods sold is that the IRS does not allow items that have not yet been sold to reduce the income received during the year from other products.  The ending inventory should reflect only items on the shelf that were not sold on December 31st. The ending inventory will be your beginning inventory next year. 

[bobb1]

Thanks. Your answer was what I was looking for.  I still have an issue as my G/P on tax return is not the same as my books G/P by 29,000.

[bobb1]

Should my gross profit from books be the same gross profit as tax return

[DianeW]

Tax gross profit does is not always the same as book gross profit.  The difference can be a variety of things, one example is depreciation on the tax return versus the books.  You should be able to account for the difference by comparing the numbers on your tax return with the profit and loss statement from your books.