Inventory is reported on the ______. Later, when the inventory is sold, it becomes ______.

Inventory is reported on the balance sheet. Later, when the inventory is sold, it becomes cost of goods sold (COGS) on the income statement.

This distinction is crucial in accounting, as it reflects the flow of inventory through financial statements. When inventory is initially purchased, it is recorded as an asset on the balance sheet. Once the inventory is sold, its cost is reclassified from an asset to an expense, illustrating the costs associated with producing revenue during a specific period. This process helps in accurately assessing a company's financial performance by matching expenses with the revenues they help generate.