12.1 What is Inventory?

Question 1

Define ‘Inventory’. / What is inventory?

Answer 1

Inventory refers to the goods a business buys and sells. / Inventory is a current asset found in the balance sheet and refers to goods held for resale.

Question 2

Define ‘goods’.

Answer 2

‘Goods’ is the general term for things that the business is buying and selling, as part of its main business activity.

Question 3

What does a trading business do?

Answer 3

Buys goods from suppliers and sells them to customers.

Question 4

Revision (Chapter 3, Page 29)

Define ‘assets’.

Answer 4

Assets are resources usually owned or controlled by the business to carry out its business activities. They are expected to generate future benefits.

Question 5

Why is inventory an asset?

Answer 5

Inventory is an asset because to the business, it is one of its resources.