Inventory: finished goods (FG) is the account-style name for finished goods inventory, a manufacturer's stock of completed products that are ready to sell but have not yet been sold. It is the last of three inventory accounts in manufacturing, after raw materials inventory and work-in-process inventory.
How costs reach finished goods
When production of a batch or job is completed, its full manufacturing cost (direct materials, direct labor and applied manufacturing overhead) is moved out of work in process. The entry debits Inventory: Finished Goods and credits Inventory: Work-in-Process for the cost of goods manufactured.
When the goods are sold, their cost moves again: Cost of Goods Sold is debited and Inventory: Finished Goods is credited. Whatever has been completed but not yet sold stays in the account and is reported as a current asset on the balance sheet.
For example, if FG starts the month at $60,000, goods costing $210,000 are completed, and goods costing $230,000 are sold, the ending balance is $40,000. At each reporting date the balance is tested for impairment; under US GAAP, FIFO or average-cost inventory is carried at the lower of cost and net realizable value, so slow-moving or damaged goods may need to be written down.