For inventoriable costs to become expenses under the matching principle
A) the product must be finished and in stock.
B) the product must be expensed based on its percentage-of-completion.
C) the product to which they attach must be sold.
D) all accounts payable must be settled.

Question

Quizplus · Accepted Answer

Inventoriable costs become expenses under the matching principle when the product to which they attach is sold. This is because the cost of goods sold is recognized as an expense in the same period that the revenue from the sale of the product is recognized, in order to match expenses with revenues. Option A is not correct, as inventory is not necessarily expensed only when it is finished and in stock. Option B is also not correct, as percentage-of-completion accounting applies to long-term contracts and not inventories. Option D is not relevant to when inventoriable costs become expenses.

For Inventoriable Costs to Become Expenses Under the Matching Principle