Based on the matching principle,all product cost flow through
A)Raw Material Inventory,Work in Process Inventory and Finished Goods until the goods are sold.
B)Raw Material Inventory,Work in Process Inventory and Manufacturing Overhead until the goods are sold.
C)Raw Material Inventory,Direct Materials and Conversion,and Work in Process.
D)Raw Material Inventory,Conversion,and Finished Goods until the goods are sold.

Question

Quizplus · Accepted Answer

The matching principle states that expenses should be recognized in the same period as the related revenue. Therefore, product costs, which are the expenses incurred to manufacture the goods, should be matched with the revenue from selling those goods. This means that product costs, including raw materials, direct labor, and manufacturing overhead, flow through the inventory accounts (Raw Material Inventory, Work in Process Inventory, and Finished Goods Inventory) until the goods are sold. Once the goods are sold, the cost of goods sold account is debited, and the corresponding inventory accounts are credited. Option A correctly reflects this flow of costs. Option B is incorrect because manufacturing overhead is a component of product costs that flows through the inventory accounts. Option C is incorrect because Direct Materials and Conversion are components of Work in Process, not separate inventory accounts. Option D is incorrect because Conversion costs are part of the Work in Process Inventory, not a separate inventory account.

Based on the Matching Principle,all Product Cost Flow Through