Product costs,such as manufacturing overhead,should be treated as an asset in an inventory account until the product is sold.

Question

Quizplus · Accepted Answer

This statement is true according to generally accepted accounting principles (GAAP). Product costs, including manufacturing overhead, are included in the cost of goods sold only when the products are sold to customers. Until then, these costs are recognized as assets in the inventory account. Once the products are sold, the cost of goods sold account is debited and the inventory account is credited. This way, the expenses related to the manufacturing process are matched with the revenues generated from sales.

Product Costs,such as Manufacturing Overhead,should Be Treated as an Asset