Distinguish among the three categories of expenses. Provide an example of each
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total answers (1)
Accounting
- Product costs: are expenses that can be matched directly with specific transactions or events and are recognized upon recognition of the revenues. An example of a product cost would be the expensing of inventory through cost of goods sold.
- Period costs: are expenses that are recognized during the period in which cash is spent or liabilities incurred for goods and services that are used up at that time or shortly thereafter. Such expenses cannot be directly related to specific transactions and are assumed to provide no future benefit. Examples of such expenses are administrative salaries, rent expense, and interest expense.
- Allocable costs: are allocated by systematic and rational procedures to the periods during which the related assets are expected to provide benefits. Depreciation of plant and equipment is an example of such an expense.
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