preparation of income statement

manufacturing overhead

indirect costs incurred to produce products.

Costs of Goods sold

is the cost of a product to a distributor, manufacturer or retailer.

two types of cost

manufacturing/ product non manufacturing/ period

direct materials

materials input that can be directly and conveniently traced to each unit of product

financial position preparation

merchandise inventory, end

income

Activities or events that resulted to the inflow of assets and/or outflow of liabilities

Epense

Activities or events that resulted to the outflow of assets and/or inflow of liabilities

Comprehensive Income preparation

Cost of goods sold

Epense

Decrease in capital

Cost of Goods Sold

Direct Cost of making company's product

types of inventory

Direct materials inventory, goods in process inventory, finished goods inventory

Epense

Encompasses both EXPENSE & LOSS

Income

Encompasses both REVENUE & GAIN

Income

Increase in capital

Cost of Goods sold

It appears on the Statement of Income and typically includes money spent on purchases, raw materials, labor and other cost of manufacturing

Costs of Goods sold

It does not include cost associated with marketing, sales and distribution

forms of business enterprises

Service ex. banks, schools uMerchandising ex. Supermarkets, groceries uManufacturing ex. Clothing company

direct labor

employees who physically convert materials to finished products