 In this discussion, we will discuss the discussion question of what is inventory? This seems like an obvious question, but there are a few key components and it can be more confusing than we would think at first. Therefore, if you see a essay question such as this, what is inventory? We do want to be able to define what makes inventory. And to first think about this, you can think about different types of things that we could be calling inventory and which could be not inventory. For example, if we had something like a forklift, it may be inventory or it may not be inventory for most companies. A forklift is probably not inventory, but property, plant and equipment, something used in order to help generate revenue by the use of the forklift. However, if we are in the business of purchasing and selling forklifts, then we have the forklifts are intended for the resell and therefore they would be inventory. So that's really going to be the defining factor. It's really intent is part of what inventory is. So whatever a company purchases, if they are purchasing it in order to market up, sell it in order for a profit motive through the selling of that item, then we would be saying that that is going to be an inventory item. In order to define inventory in more detail, we might want to talk about what goes into the inventory. So we know that inventory can be just about any type of item depending on the company and that company's intent. So most type of things that we might think of as assets could also be inventory if our intent is not to use it, but the intent is to resell it. Also, if we look at the cost of inventory, we're going to include things that are going to get that inventory in alignment and ready for us to sell. Those costs might include things like shipping costs, which is going to be a common type of example. If we had to pay for the shipping in order to get the inventory, then we're going to tack that on to what the purchasing price of the inventory was as basically part of the cost of inventory. In other words, we would cost that not as basically shipping expense that we would expense at the point of time that we incurred it, but we would be including it in the cost of inventory and later expensing it along with the inventory as if it was basically part of the purchase price of the inventory. When considering where the inventory will be at in terms of reporting purposes, we are going to be putting it on as an asset. It is something as an asset because we are purchased. We have it in order to help us generate revenue has not helped us generate revenue yet. It will help us generate in the future at the point of sale when we do sell it. And it's going to be more specific than that. Hopefully it is a current asset, meaning we expect it to be sold fairly quickly. And therefore it's going to be in the current asset category. When we do sell it, what will happen is we will reduce the inventory and we will then record the expense at the point of time when it has been we used it in order to help us generate revenue. We will put it into the expense of cost of goods sold.