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What is the difference between asset and inventory?
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Difference between Assets and Inventory
| S.No. | Basis of Difference | Assets | Inventory |
| 1. | Meaning | Asset refers to the economic resources that are owned or controlled by an entity or business for deriving short-term and long-term future benefits. | Inventory refers to the set of finished goods (or) raw materials used for manufacturing goods to sell them in the market. |
| 2. | Types | Assets are classified into two types namely- Fixed and Current assets. Fixed Assets are further classified into Tangible and Intangible Assets. | Inventory is classified into 3 types namely- Raw Materials, Work In Progress and Finished Goods. |
| 3. | Period/Duration | Fixed Assets are kept in the business for a longer period whereas Current Assets are kept in business for a short period but are not meant for immediate sale. | Inventory is not kept in the business for a longer period. They are meant for immediate sales to generate revenue. |
| 4. | Scope | Assets have a broad scope because they remain in the business for both long-term (Fixed Assets) and short-term (Current Assets). | Inventory has a narrow scope because they are quickly converted into revenue by selling them. |
| 5. | Key features | i) Price (or) value.
ii) Generates revenue for a longer period. iii) Maintenance cost. iv) Highly Durable. v) Subject to Depreciation. |
i) High liquidity
ii) Readily accessible to end-users. iii) Contributes to working capital management. iv) Creates seasonal demand. v) Economies of scale. |
| 6. | Methods of Valuation | i) Cost Method.
ii) Base Stock Method. iii) Fair value Method. iv) Standard Cost Method. |
i) FIFO Method.
ii) LIFO Method. iii) Simple Average Method. iv) Weighted Average Method. |
| 7. | Examples | i) Plant and Machinery.
ii) Furniture. iii) Bills Receivables. iv) Sundry Debtors. v) Patents and Trademarks. |
i) Aluminium and steel for the manufacture of utensils.
ii) Flour for bakery production. iii) Crude oil for refineries. iv) Cotton for cloth production |
| 8. | Presentation | All Assets are shown in the balance sheet on the assets side as non-current and current assets. | Inventory is shown on the credit side of the trading account and under the head current assets in the balance sheet. |
>Related Long Quiz for Practice Quiz 21 – Inventory
