Inventory accounting for breweries, food producers and dealerships

For a Langley brewery, food producer or dealership, inventory is not a footnote — it is often the largest number on the balance sheet and the one that most directly moves reported profit. Because closing inventory feeds straight into cost of goods sold, how you value and count it changes your tax bill. This guide covers the rules that govern inventory valuation and the practical points that trip up production and dealer businesses.

Inventory valuation basics

The Income Tax Act sets the ground rules. Generally you value inventory at the lower of cost and fair market value, or you value the entire inventory at fair market value — and, importantly, you must apply the same method consistently from one year to the next. Your opening inventory for a year is simply your closing inventory from the year before. Since cost of goods sold is opening inventory plus purchases minus closing inventory, the closing figure directly determines profit — understate it and you overstate expenses; overstate it and you pay tax on profit you have not realized. Consistency and accuracy are the whole game.

Work-in-progress for production businesses

Breweries and food producers rarely end a year with only finished goods and raw materials — there is product mid-process. That work-in-progress has to be valued to reflect what has gone into it so far: the raw materials, the direct labour, and a reasonable share of production overhead. Valuing WIP at raw-material cost alone understates inventory and pulls profit into the wrong year. For a producer, a defensible method for absorbing labour and overhead into WIP is one of the more important accounting decisions you will make.

Brewery and food-producer specifics

Production businesses carry inventory in several forms at once: raw materials (grain, hops, ingredients), work-in-progress, finished goods, and packaging — all of which should be counted and valued. On the compliance side, breweries generally need to be licensed or registered with the CRA for excise before producing; that is a registration and compliance requirement separate from income tax, and the details depend on the product and volumes. The takeaway is not the excise arithmetic — it is that a brewery has both an inventory system and an excise obligation to keep straight, and the two should be set up together.

Dealership floor-plan basics

Dealerships have their own wrinkle: floor-plan financing. The vehicles or units on the lot are inventory, typically financed under a floor-plan facility until sold. For accounting, the units are held and valued as inventory, while the floor-plan interest is a financing cost of carrying that inventory. Clean tracking of what is on the lot, what has sold, and the associated financing is what keeps a dealer's margin and inventory reconciled — and what makes a lender's or the CRA's review painless.

Count procedures the CRA respects

Whatever the business, the year-end discipline is the same: perform a physical count at or near year-end, document it, and apply a clear cutoff so goods are recorded in the correct period. Keep the count sheets, reconcile them to the books, and value the counted inventory with your consistent method. Sound bookkeeping and a documented count are not just good practice — they are the evidence that supports your cost of goods sold, and they flow straight into your year-end financial statements.

The bottom line

Inventory is where production and dealer businesses quietly gain or lose accuracy on their tax. Value it consistently at the lower of cost and fair market value, capture WIP properly, keep excise and floor-plan obligations straight, and count carefully at year-end. If you run a brewery, food business or dealership in Langley or the Fraser Valley, an accountant in Langley who sets up your inventory system correctly saves you both tax surprises and review headaches.

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 — please speak with a CPA before acting on anything here.

About the author

Sunny Dhillon, CPA

Founder of EverStone CPA, an Abbotsford CPA firm, and a member of the Chartered Professional Accountants of British Columbia (CPABC). Sunny works with production and small business owners across the Fraser Valley and Canada on tax, bookkeeping and advisory. More about Sunny →  ·  Book a free consult →