Is Inventories a Current Asset?

Inventory is the asset held for sale in normal routine operations; therefore, inventory is considered a
current asset because the company intends to process and sell the inventory within twelve months from
the reporting date or, more precisely, within the next accounting year.

Inventory is the goods used to produce finished items and acts as a buffer between the manufacturing
of goods and the goods the Company has to sell to fulfill the orders. Since inventory is used to
manufacture goods that generate revenue for the Company, it is classified as an asset.

But whether inventory is a current asset or a non-current asset?

Current assets can convert into cash or cash equivalents in a short period, usually taken as one year. In
contrast, non-current assets take longer than one year to be converted into cash.

Inventory is considered to be sold off within one year. However, a lot depends on the business
opportunities and market conditions; however, it is considered that the inventory on the Company’s
balance sheet is sold off in less than one year and, hence, recorded as a current asset.