Inventory asset or liability is an accounting term used to describe a company’s inventory, which is tracked as either an asset or liability. An inventory asset or liability is reported on the balance sheet and reflects the cost of goods sold (COGS), value of stock on hand, and any other related costs associated with the purchase and sale of inventory. When businesses keep track of their inventory, they can more accurately monitor their stock levels, know exactly when items need to be re-ordered, and decide how much money to invest in future inventory purchases. With this detailed information, businesses can make smarter financial decisions about their inventory asset or liabilities.