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
E)Product costs eventually affect both the balance sheet and the income statement.

Question

Quizplus · Accepted Answer

Product costs eventually affect both the balance sheet and the income statement. This is because product costs are initially recorded as inventory on the balance sheet and are later recognized as cost of goods sold on the income statement when the products are sold. Therefore, product costs impact both financial statements. Period costs, on the other hand, are expensed immediately and only affect the income statement. Neither product costs nor period costs directly affect the Statement of Retained Earnings.

Which of the Following Statements Is True