Future Business Leaders of America (FBLA) Accounting Practice Test

What is defined as the goods bought for resale to customers?

1. Inventory

2. Merchandise

3. Assets

4. Encumbrances

The correct answer is: Merchandise

The term that represents the goods bought for resale to customers is merchandise. Merchandise refers specifically to the items that a retail business acquires with the intention of selling them to consumers. This definition is central to understanding retail operations, as companies stock their shelves with merchandise to meet customer demand and generate revenue. Inventory, while related and sometimes used interchangeably with merchandise, encompasses a broader category that includes not only finished goods but also work-in-progress items and raw materials. Assets, in a business context, represent all resources owned by a company that have economic value, which would include merchandise but also extend to buildings, equipment, and cash. Encumbrances typically relate to financial obligations and liabilities, rather than physical goods for resale. Recognizing the distinct role of merchandise in retail helps clarify its function in the supply chain and financial accounting, as it directly affects a company's sales and profitability.