Product costs are treated as expenses of the accounting period in which they are incurred because they are expected to benefit revenues in that period and are not expected to benefit revenues in future periods (because there is not sufficient evidence to conclude that such future benefit exists).

Question

Quizplus · Accepted Answer

Product costs are not treated as expenses in the period they are incurred if they are associated with inventory. They are capitalized as part of the cost of inventory and only expensed as cost of goods sold in the period the inventory is sold, reflecting the matching principle where expenses are matched with the revenues they help generate.

Product Costs Are Treated as Expenses of the Accounting Period