What does “goods available for sale” include?

"Goods available for sale" is a term used in accounting and inventory management to represent the total inventory that a business has available to sell during a specific period. This figure is crucial for determining how much product a company has on hand before any sales occur.

The correct choice is rooted in the basic inventory accounting equation. It is calculated by taking the beginning inventory, which is the quantity of goods the company had at the start of the accounting period, and adding any additions to inventory, such as purchases made during that period. This addition reflects the total amount of inventory that can potentially be sold, regardless of when it was obtained or its condition, as long as it is available for sale.

In contrast, total cash flow represents broader financial movements and doesn't specifically relate to inventory levels. The cost of defective goods would not be included in "goods available for sale" because defective items are typically not sellable. A full inventory list sold would imply a sales figure rather than an available figure, which does not accurately reflect the inventory available for sale at a given moment.

Understanding this concept is essential for interpreting financial statements and managing inventory effectively in any organization, as it directly impacts revenue and business performance.