If a variance is favourable, it should be closed directly to cost of sales.

Name: If a variance is favourable, it should be closed directly to cost of sales.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Favorable variances are typically closed to income summary or directly to retained earnings, not directly to cost of sales. They reflect a better-than-expected performance, such as lower costs or higher revenues, and are treated as part of the overall financial performance of the period.

If a Variance Is Favourable, It Should Be Closed Directly