Since variances are temporary accounts, how are they usually handled?
A) Closed directly to cost of goods sold at the end of each month.
B) Closed directly to cost of goods sold at the end of each accounting period.
C) Closed directly to cost of goods manufactured at the end of each accounting period.
D) Closed directly to profit and loss account at the end of the year.

Question

Quizplus · Accepted Answer

Variances are temporary accounts that are closed directly to cost of goods sold at the end of each accounting period, as they are related to production or manufacturing activities. This helps to accurately reflect the cost of goods sold and remove any variances that may have occurred during the period. Closing variances directly to cost of goods manufactured or to profit and loss account may not be as relevant or accurate.

Since Variances Are Temporary Accounts, How Are They Usually Handled