What is Merchandise Inventory?

• A. The goods a business has on hand for sale to customers classified as an Asset
• B. The total amount of cash in the bank
• C. The value of intangible assets
• D. The amount of merchandise on order

Answer: (A)

Merchandise inventory is the goods a business has on hand for sale to customers, and it is classified as a current asset. This means it represents items the company intends to sell in the ordinary course of business and will typically be converted into cash within a year. In a merchandising company, inventory is central because it’s the cost of the goods available for sale, and it affects the cost of goods sold when those items are sold.

The other options don’t fit: cash in the bank is a cash asset, not inventory; intangible assets are things like patents or goodwill; merchandise on order refers to goods that haven’t been received or owned yet, so they aren’t inventory until they’re in possession and title has passed.