For a Langley brewery, food producer or dealership, inventory is often the biggest balance-sheet number and drives profit directly through cost of goods sold. How you value and count it changes your tax. This guide covers the rules and the common traps.
Quick answer: For tax, inventory is generally valued at the lower of cost and fair market value (or the whole inventory at fair market value), using the same method consistently each year. Work-in-progress must reflect materials, labour and overhead invested so far, not just raw materials. Breweries and food producers carry raw-material, WIP and packaging inventory and generally need excise registration; dealerships carry financed floor-plan inventory. A documented year-end count is what supports your cost of goods sold if the CRA reviews it.
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Inventory accounting: the valuation basics
The Income Tax Act generally lets you value inventory at the lower of cost and fair market value, or the entire inventory at fair market value, applied consistently. Opening inventory is the prior closing inventory. Since cost of goods sold is opening plus purchases minus closing, understating closing inventory overstates expenses, and overstating it taxes unrealized profit.
Work-in-progress for production businesses
Producers usually end the year with product mid-process. That work-in-progress is valued at materials, direct labour and a share of production overhead. Raw-material cost alone understates it and shifts profit, so a defensible absorption method is a key decision.
Brewery and food-producer specifics
Producers hold raw materials (grain, hops, ingredients), work-in-progress, finished goods and packaging, all counted and valued. Breweries generally must also be licensed or registered with the CRA for excise before producing, separately from income tax. Set up inventory and excise together.
Dealership floor-plan basics
Dealers use floor-plan financing. Lot units are inventory until sold; floor-plan interest is a financing cost. Tracking what is on the lot, what sold and the financing keeps a dealer’s margin reconciled and reviews painless.
Count procedures the CRA respects
Year-end is the same everywhere: a documented physical count with a clear cutoff, sheets kept, reconciled and valued consistently. Good bookkeeping and a documented count support cost of goods sold and feed your year-end financial statements. See our year-end inventory count guide.
The bottom line
Inventory is where producers and dealers gain or lose tax accuracy. Value consistently, capture WIP, manage excise and floor plans, and count carefully. A Langley or Fraser Valley business benefits from an accountant in Langley who sets inventory up right.
This article is general information for Canadian business owners and is current as of July 2026. It is not tax advice, and your situation is unique, so please speak with a CPA before acting on anything here.
Prepared and reviewed by a CPA at EverStone CPA, serving businesses in BC, Alberta, Ontario and Manitoba. About the firm → · Send an enquiry →
Inventory-carrying businesses across the valley run into this. We work with owners in Abbotsford, Chilliwack, Mission, Maple Ridge and Surrey.
Frequently asked questions
How do I value inventory for tax in Canada?+
What is work-in-progress and how is it valued?+
Do breweries and food producers need to register for excise?+
How should I handle a year-end inventory count?+
Can I change my inventory valuation method?+
Why does closing inventory change my tax bill?+
How is floor-plan financing handled for a dealership?+
Inventory-heavy business?
We set up inventory, WIP and cost of goods sold so your margin is right and your year-end holds up. Send an enquiry to a CPA.
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Where an external engagement is coming, inventory is the first thing tested, and the count an auditor will accept is what that requires.
Perishable stock and zero-rated output make food a harder case than most; inventory in a food processing business works through one.
A manufacturer carries a third category a reseller never does, work in progress, and inventory that is manufactured rather than bought sets out how it is valued.
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