Inventory is classified as which type of account in accounting?

Inventory is classified as a current asset in accounting because it consists of goods that a company intends to sell in the normal course of business. Current assets are defined as assets that are expected to be converted into cash or used up within one year or one operating cycle, whichever is longer.

Inventory appears on the balance sheet and is crucial for determining a company's liquidity since it can be easily sold to generate cash. Since companies often hold inventory for less than a year, it fits within the criteria for current assets. Understanding this classification is fundamental for analyzing a company's financial health, as it affects working capital and the overall operational efficiency.

In contrast, fixed assets are long-term tangible assets like property or equipment used in operations, intangible assets include non-physical assets such as patents or trademarks, and long-term liabilities represent obligations due beyond one year. These classifications help in assessing a company's financial position at a glance.