When it comes to a year end, we will normally do a cut-off on stock take and calculate the inventory value to be brought forward to the next financial year. This method is known as Periodic Inventory.
Let's illustrate the following scenario in your P&L:
In order to achieve the chart above, there are 2 sets of journals have to be passed.
I. Closing Inventory
At the end of your financial year, pass a journal entry to capture your closing inventory. In the example above, your closing inventory is RM2,000. If you are not sure how to pass a journal, read here.
The double entry will be debiting the Inventory of a Balance Sheet account, and credit the Closing Inventory of a P&L account. Note that the date should be the last day of your financial year, i.e. 31/12/2017.
Dr Inventory 2000 Cr Closing Inventory 2000
II. Opening Inventory
Now, after you have closed the inventory for previous year, you should also set an opening for the next financial year to bring forward the inventory value. The double entry will be debiting the Opening Inventory of a P&L account and credit the Inventory of a Balance Sheet account from the previous journal. Note that the date should be the first day of your new financial year, i.e. 1/1/2018.
Dr Opening Inventory 2000 Cr Inventory 2000
When you review your P&L on year 2017, you should see the figure reflected on COGS as below:
This should be how it look like on year 2018 as opening.