Merchandise Inventory Normal Balance is an accounting term that represents the value of stocks on hand at a company or organization. It includes both finished goods and raw materials that are used in the production process. The normal balance is the amount of inventory that should be kept in stock, with any excess representing potential overstocking which can affect a company’s profitability. This is why it’s important to accurately keep track of your inventory levels, as too little or too much can have detrimental effects. By maintaining a proper merchandise inventory normal balance, companies can keep their costs reasonable and ensure a healthy profit margin.