Is Inventory a Liability or an Asset?

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on March 31, 2023

Inventory is almost always an asset for accounting purposes. An asset is an item that will provide an economic benefit at some point in the future. A liability is an item that represents a financial deficit or debt.

Inventory production is usually closely correlated to demand, and so inventory usually sells quickly after being produced, making it an asset.

However, inventory that is left unsold may become a liability if the cost of storage is high or if the inventory deteriorates and becomes unsellable.

Is Inventory a Liability or an Asset? FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.