What type of account is inventory?

• A. Asset
• B. Liability
• C. Revenue
• D. Equity

Answer: (A)

Inventory represents goods a business owns for sale or is in the process of producing for sale. This makes it an asset because it will provide future economic benefits, either by being sold for cash or by contributing to revenue in normal operations. On the balance sheet, inventory is classified as a current asset since it’s typically converted into cash or sold within the operating cycle or within a year. In double-entry accounting, asset accounts have a normal debit balance, so inventory increases with a debit when acquired or produced and decreases with a credit when sold or written down. It’s not a liability (an obligation to others), not revenue (income from selling goods or services), and not equity (the owner’s claim on assets). Therefore, inventory is an asset.