Is Inventory a Liability or an Asset?

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on January 11, 2021

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

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.