Product costs and period costs

A manufacturer’s product costs are the direct materials, direct labor, and manufacturing overhead used in making its products. (Manufacturing overhead is also referred to as factory overhead, indirect manufacturing costs, and burden.) The product costs of direct materials, direct labor, and manufacturing overhead are also costs, assigned to inventory (work-in-progress and finished goods) since these are the necessary costs of manufacturing the products.

Period costs are not a necessary part of the manufacturing process. As a result, period costs cannot be assigned to the products or to the cost of inventory. The period costs are usually associated with the selling function of the business or its general administration. The period costs are reported as expenses in the accounting period in … Read more

Inventories introduction

The principles for recognising and measuring inventories are included in here. Inventories are assets:

  1. held for sale in the ordinary course of business;
  2. in the process of production for such sale; or
  3. in the form of materials or supplies to be consumed in the production process or in the rendering of services.

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Inventories – the highlights

See Inventories for the IFRS in summary, the complete IAS 2 Inventories discussion is outstanding.

Inventory is also called stock in trade, or just stock.

The IFRS definition of inventory is brief, let’s add some juice (if that is possible in accounting, and off course it is possible!!) or look at it as being in business.… Read more