Costs that flow directly to the income statement as expenses are called:
A) Period costs.
B) Capitalized costs.
C) General costs.
D) Balance sheet costs.
E) Product costs.

Question

Quizplus · Accepted Answer

Period costs are expenses that flow directly to the income statement in the period in which they are incurred. This includes expenses such as salaries, rent, and utilities that are not directly related to the production of inventory. Capitalized costs are costs that are recorded as an asset on the balance sheet and then expensed over time as the asset is used. General costs and balance sheet costs are not commonly used terms in accounting. Product costs include both direct and indirect costs associated with the production of inventory and are initially recorded as an asset on the balance sheet before being expensed as Cost of Goods Sold when the inventory is sold.

Costs That Flow Directly to the Income Statement as Expenses