Xero Certification Practice Test 2025 - Free Xero Practice Questions and Study Guide

Creating a new account with Inventory as the account type is the appropriate action in this scenario because inventory items need to be linked to a specific asset account that reflects their nature in accounting terms. Inventory asset accounts track the value of goods that a business holds for sale, and having an appropriate account ensures that your financial statements accurately reflect your assets.

When you cannot select an existing inventory asset account, it's likely that either no such account is set up or the available accounts do not meet the necessary criteria for inventory tracking. By creating a new account designated specifically for inventory, you can ensure that it adheres to the accounting standards required for tracking these types of assets. This action facilitates the correct management and reporting of inventory on financial reports, which is essential for any business that deals with physical goods.

Using a default account may not align with the specific needs of your inventory tracking, and contacting support or simply removing the item does not address the root cause of the inability to select an inventory account. Instead, proactively creating the necessary account ensures that you can proceed with managing your inventory effectively.