An analyst must be familiar with the concepts involved in determining income. The amount of in- come reported for a company depends on the recognition of revenues and expenses for a given time period. In certain cases, costs are recognized as expenses at the time of product sale; in other situations, guidelines are applied in capitalizing costs and recognizing them as expenses in future periods. Explain the rationale for recognizing costs as expenses at the time of product sale. What is the rationale underlying the appropriateness of treating costs as expenses of a period instead of assigning the costs to an asset? Explain. Under what circumstances is it appropriate to treat a cost as an asset instead of as an expense? Explain. Certain expenses are assigned to specific accounting periods on the basis of systematic and rational allocation Identify the conditions necessary to treat a cost as a loss.
An analyst must be familiar with the concepts involved in determining income. The amount of in- come reported for a company depends on the recognition of revenues and expenses for a given time period. In certain cases, costs are recognized as expenses at the time of product sale; in other situations, guidelines are applied in capitalizing costs and recognizing them as expenses in future periods. Explain the rationale for recognizing costs as expenses at the time of product sale. What is the rationale underlying the appropriateness of treating costs as expenses of a period instead of assigning the costs to an asset? Explain. Under what circumstances is it appropriate to treat a cost as an asset instead of as an expense? Explain. Certain expenses are assigned to specific accounting periods on the basis of systematic and rational allocation Identify the conditions necessary to treat a cost as a loss.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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An analyst must be familiar with the concepts involved in determining income. The amount of in- come reported for a company depends on the recognition of revenues and expenses for a given time period. In certain cases, costs are recognized as expenses at the time of product sale; in other situations, guidelines are applied in capitalizing costs and recognizing them as expenses in future periods.
- Explain the rationale for recognizing costs as expenses at the time of product sale.
- What is the rationale underlying the appropriateness of treating costs as expenses of a period instead of assigning the costs to an asset? Explain.
- Under what circumstances is it appropriate to treat a cost as an asset instead of as an expense? Explain.
- Certain expenses are assigned to specific accounting periods on the basis of systematic and rational allocation
- Identify the conditions necessary to treat a cost as a loss.
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Step 1 Introduction
VIEWStep 2 Part 1) Explanation- Rationale for Product costing
VIEWStep 3 Part 2) Explanation- Rationale behind Period costing
VIEWStep 4 Part 3) Explanation- Rationale behind cost of Asset as against period costs
VIEWStep 5 Part 4) Explanation- Rationale behind allocation of expenses in periods
VIEWStep 6 Part 5) Explanation- conditions necessary to treat a cost as a loss.
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