All inventory on hand when the physical inventory is taken.

+

Merchandise in transit that was purchased FOB Shipping Point.

+

Merchandise in transit that was sold FOB Destination.

+

Merchandise on consignment in other locations that is still owned by the company taking the inventory count.

-

Merchandise included in the inventory on hand that belongs to another company but is being held on consignment.

=

Inventory shown on the financial statements.