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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Where is inventory reported in the financial statements?

As a current asset on the balance sheet

As a revenue on the income statement

As an expense on the income statement

As a liability on the balance sheet

Previous problemNext problem

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 in production. It is considered an asset because it has economic value and is expected to provide future benefits.

Identify the classification of inventory: Inventory is classified as a current asset because it is expected to be converted into cash or sold within one year or the operating cycle, whichever is longer.

Locate inventory on the financial statements: Inventory is reported on the balance sheet under the 'Current Assets' section. This is because it is a resource that the company owns and expects to use or sell in the short term.

Clarify why inventory is not reported elsewhere: Inventory is not reported as revenue on the income statement because revenue represents the income earned from selling goods or services, not the goods themselves. It is also not reported as an expense because expenses represent costs incurred, and inventory is not yet consumed or sold. Lastly, inventory is not a liability because liabilities represent obligations, not owned resources.

Review the correct reporting location: Based on the above analysis, inventory is reported as a current asset on the balance sheet, reflecting its role as a resource available for sale or production in the near term.