Final answer:
Inventory capitalization rules may vary based on the type of business and the accounting standards, with inventory appearing as an asset on the balance sheet; expenses are recognized when the inventory is sold.
Step-by-step explanation:
When discussing which statements are correct regarding inventory capitalization rules, it's important to understand that:
- (b) Inventory capitalization rules may vary based on accounting standards and regulations. This means that different types of businesses, or businesses in different regions, may follow different guidelines for recording inventory on their financial statements.
- (d) Capitalized inventory appears as an asset on the balance sheet. When inventory is purchased or produced, it is recorded as an asset, reflecting a future economic benefit for the company.
Contrary to option (a), capitalization rules are not universal; they change depending on factors such as the industry and the accounting framework employed (e.g., GAAP or IFRS). Furthermore, option (c) is incorrect because capitalizing inventory does not mean recognizing its cost as an expense immediately. Instead, the expense is recognized when the inventory is sold, which is the concept of matching expenses with the related revenues.
Therefore, the correct answer is a) Inventory capitalization rules are the same for all types of businesses.