Multiple Choice
If you are managing inventory of work in process, which inventory system provides continuous, real-time updates to the Work in Process account?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
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Which of the following is NOT a type of inventory typically reported on a company's balance sheet?
A
Accounts receivable
B
Finished goods
C
Raw materials
D
Work in process
Verified step by step guidance1
Understand the concept of inventory: Inventory refers to the goods and materials that a company holds for the purpose of resale or production. It is typically classified into three categories: finished goods, raw materials, and work in process.
Review the types of inventory reported on a balance sheet: Finished goods are completed products ready for sale, raw materials are the basic inputs used in production, and work in process refers to partially completed goods still undergoing production.
Identify the term 'Accounts receivable': Accounts receivable represents amounts owed to the company by customers for goods or services already delivered. It is classified as a current asset but is not considered inventory.
Compare the options provided: Finished goods, raw materials, and work in process are all types of inventory reported on the balance sheet. Accounts receivable, however, is not inventory but a separate asset category.
Conclude that the correct answer is 'Accounts receivable' because it does not fall under the definition of inventory typically reported on a company's balance sheet.
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