Which account CANNOT be linked to an inventory item?

Question

BlackTom AI · Accepted Answer

To approach this question, I’ll evaluate what each account type represents in relation to inventory items. 
Option 1: Bank. Bank accounts are used to track cash flows and balances, not the physical or cost-related details of inventory items. Linking a bank account to an inventory item would conflate cash management with inventory costing, which is not how inventories are typically structured in most accounting systems. 
Option 2: Revenue. Revenue accounts are commonly linked to inventory items when recording sales; the sale of an inventory item often posts to revenue and reflects the cost of goods sold against that item. So, linking revenue to inventory items is a standard practice in sales transactions. 
Option 3: COGS (Cost of Goods Sold). COGS is inherently tied to inventory because it represents the cost associated with the items that have been sold. It is natural to link COGS to inventory to reflect the expense side of a sale. 
Option 4: Variance. Variance accounts are used to capture differences between expected and actual costs, often in manufacturing or cost accounting contexts. It can be appropriate to link variance accounts to inventory items for tracking discrepancies, spoilage, or standard vs. actual costs. 
Option 5: Asset. Inventory items themselves are a form of asset, so linking an asset account to an inventory item aligns with the concept of recording the value of stock on hand. 
In summary, most accounting systems allow linking an inventory item to revenue, COGS, variance, and asset accounts because these links reflect the financial implications of purchasing, holding, selling, and reconciling inventory. However, linking a Bank account to an inventory item would mix short‑term cash balances with inventory valuation, which is not a typical or appropriate linkage for inventory item records. Therefore, the option that cannot be linked in this context is the Bank account.

SG5024E1 - Sage 50 Accounting Power User Test

Which account CANNOT be linked to an inventory item?

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