Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

Types of Accounting

Financial Accounting

1. Introduction to Accounting

Types of Accounting

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Multiple Choice

Both direct materials and indirect materials are classified as which type of accounting cost?

Administrative costs

Period costs

Product costs

Selling costs

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Verified step by step guidance

Understand the classification of costs in Financial Accounting: Costs are typically categorized into product costs and period costs. Product costs are directly associated with the production of goods, while period costs are related to non-production activities such as administration and selling.

Recognize the distinction between direct materials and indirect materials: Direct materials are raw materials that can be directly traced to the production of a specific product, while indirect materials are used in the production process but cannot be directly traced to a specific product.

Identify the classification of direct and indirect materials: Both direct and indirect materials are considered part of product costs because they are integral to the manufacturing process and contribute to the creation of inventory.

Understand why these materials are not classified as administrative or selling costs: Administrative costs are related to the general management of the business, and selling costs are associated with marketing and distribution. Since direct and indirect materials are tied to production, they do not fall under these categories.

Conclude that direct and indirect materials are classified as product costs, which are capitalized as inventory on the balance sheet and later expensed as cost of goods sold when the inventory is sold.