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Greenhouse Effect of Earth

PRODUCT COST AND PERIOD COST- ALL YOU NEED TO KNOW

PRODUCT COST AND PERIOD COST- ALL YOU NEED TO KNOW

Product Cost

As the name suggests, product costs are derived from producing major types of products by the business. Product cost is only incurred when some product is acquired or produced. If there is no production of any goods, the business will incur no product cost.

Product Costs include any cost of acquiring or producing a product. If you manufacture a product, these costs would include direct materials and labor along with manufacturing overhead. Most of the components of a manufactured item will be raw materials that, when received, are recorded as inventory on the balance sheet. Only when they are used to produce and sell goods are they moved to cost of goods sold, which is located on the income statement. When the raw materials are brought in they will sit on the balance sheet. When the product is manufactured and then sold a corresponding amount from the inventory account will be moved to the income statement. So if you sell a widget for RS.20 that had RS.10 worth of raw materials, you would record the sale as a credit (increasing) to sales and a debit (increasing) either cash or accounts receivable. The  RS.10 direct materials would be a debit to cost of goods sold (increasing) and a credit to inventory (decreasing)……………

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