Which balance sheet component represents goods purchased or produced for sale to customers?

Which balance sheet component represents goods purchased or produced for sale to customers?

• A. Cost of goods sold
• B. Revenue
• C. Accounts payable
• D. Inventory

Answer: (D)

Inventory is the balance sheet line item that represents goods a business has purchased or produced for sale. It sits as a current asset and includes finished goods ready for sale, work in progress, and materials a manufacturer uses to make products. This is why it best matches goods held for sale to customers. Cost of goods sold is the expense recorded on the income statement when those goods are sold, not a balance sheet item. Revenue is income from sales, and accounts payable is a liability owed to suppliers. In practice, a retailer would label this as merchandise inventory, while a manufacturer might reference finished goods inventory.

Inventory is the balance sheet line item that represents goods a business has purchased or produced for sale. It sits as a current asset and includes finished goods ready for sale, work in progress, and materials a manufacturer uses to make products. This is why it best matches goods held for sale to customers. Cost of goods sold is the expense recorded on the income statement when those goods are sold, not a balance sheet item. Revenue is income from sales, and accounts payable is a liability owed to suppliers. In practice, a retailer would label this as merchandise inventory, while a manufacturer might reference finished goods inventory.