Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

The Financial Statements

Financial Accounting

1. Introduction to Accounting

The Financial Statements

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Multiple Choice

Where is inventory reported in the financial statements?

As a liability on the balance sheet

As a revenue on the income statement

As an expense on the statement of cash flows

As a current asset on the balance sheet

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Verified step by step guidance

Understand the nature of inventory: Inventory represents goods that a company holds for sale in the ordinary course of business or materials used to produce goods for sale. It is considered an asset because it has economic value and can generate future benefits.

Identify the classification of inventory: Inventory is classified as a current asset because it is expected to be converted into cash (through sales) or used up within one operating cycle, typically within a year.

Locate inventory on the financial statements: Inventory is reported on the balance sheet under the 'Current Assets' section, along with other short-term assets like cash, accounts receivable, and prepaid expenses.

Understand why inventory is not reported elsewhere: Inventory is not a liability because it does not represent an obligation. It is not revenue because it has not yet been sold, and it is not an expense because it has not yet been consumed or sold to generate revenue.

Conclude the correct reporting: Based on the above analysis, inventory is reported as a current asset on the balance sheet, reflecting its role in the company's operations and its short-term nature.