Which of the following statements is true?
A) Product costs affect only the balance sheet.
B) Product costs affect only the income statement.
C) Period costs affect only the balance sheet.
D) Neither product costs nor period costs affect the Statement of Retained Earnings. This can also be a true statement if the period costs were prepaid (i.e., prepaid advertising, depreciation).
E) Product costs eventually affect both the balance sheet and the income statement.

Question

Quizplus · Accepted Answer

Product costs are initially recorded as inventory on the balance sheet. When the inventory is sold, these costs then flow through to the income statement as part of the cost of goods sold (COGS), affecting both financial statements.

Which of the Following Statements Is True