Which of the following costs are reported on the income statement as the cost of goods sold?
Correct answer: A. Product cost
- A. Product cost
- B. Period cost
- C. Both product cost and period cost
- D. Neither product cost nor period cost
Explanation
Product costs are attached to inventory and become cost of goods sold when the related products are sold. Period costs, such as administrative and selling expenses, are charged to the income statement in the period incurred.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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