The order that cost elements flow through accounts until they are recognized as an expense is

Question

Quizplus · Accepted Answer

The cost elements first flow through the Work-in-Process account as materials, labor, and overhead costs are incurred. Once the production is finished, the cost elements flow through the Finished Goods account as the product is completed and ready to be sold. Finally, when the finished goods are sold, the cost elements flow through the Cost of Goods Sold account, recognizing the expense of producing the sold goods. Therefore, the correct order is Work-in-Process, Finished Goods, and then Cost of Goods Sold, which is represented by option D.

The Order That Cost Elements Flow Through Accounts Until They