On the Balance Sheet,inventories Are Reported As

question 69

Multiple Choice

On the balance sheet,inventories are reported as:

• A)a liability,because goods in inventory are tying up a company's money without earning income.
• B)an asset,because goods in inventories are owned by the company.
• C)an expense,because goods in inventory have been paid for but not yet sold.
• D)a revenue,because goods in inventory will be sold in the future.

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Definitions:

Consuming Goods

Goods that are used by consumers and are typically expended when used, opposed to durable goods which are designed to last for a prolonged period.

Generating Revenues

Generating revenues refers to the process through which a business earns money by selling goods or providing services.

Expenses

Outflows or other using up of assets or incurrences of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity’s ongoing major operations.

Increase Side

In accounting, it refers to the side of a ledger account (debit or credit) where increases are recorded, depending on the nature of the account.