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

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

Financial Accounting

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

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Multiple Choice

In a manufacturing company, period costs would flow directly to which of the following accounts?

Cost of Goods Sold

Income Statement as an expense

Work in Process Inventory

Finished Goods Inventory

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Verified step by step guidance

Understand the concept of period costs: Period costs are expenses that are not directly tied to the production process. These include selling, general, and administrative expenses, and they are expensed in the period they are incurred.

Differentiate between product costs and period costs: Product costs are directly related to manufacturing and are included in inventory accounts (Work in Process Inventory or Finished Goods Inventory) until the goods are sold. Period costs, on the other hand, are not included in inventory and are expensed directly on the Income Statement.

Analyze the options provided: Cost of Goods Sold is related to product costs, as it represents the cost of inventory sold during the period. Work in Process Inventory and Finished Goods Inventory are also tied to product costs, as they represent inventory accounts. Period costs do not flow into these accounts.

Determine where period costs are recorded: Since period costs are not part of inventory or Cost of Goods Sold, they are recorded directly as expenses on the Income Statement during the period they are incurred.

Conclude that the correct answer is 'Income Statement as an expense,' because period costs are expensed immediately and do not flow into inventory or Cost of Goods Sold accounts.