Misclassifying a product cost as a period cost will usually cause the income statement to be incorrect,but the balance sheet will not be affected.

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Misclassifying a product cost as a period cost will not only cause the income statement to be incorrect, but it will also affect the balance sheet. Product costs are treated as inventory on the balance sheet until they are sold, while period costs are expensed immediately. Therefore, misclassifying a product cost as a period cost will result in an overstatement of expenses on the income statement and an understatement of inventory on the balance sheet.

Misclassifying a Product Cost as a Period Cost Will Usually