Question

Period costs (or selling and administrative expenses) _____ flow through inventories on the balance sheet?

1) Always
2) Never
3) Sometimes
4) Depends on the type of inventory

Answer 1

Period costs, such as selling and administrative expenses, never flow through inventories on the balance sheet. Correct option is 2.

Step-by-step explanation:

Period costs, also known as selling and administrative expenses, never flow through inventories on the balance sheet. Period costs are expenses that are not directly related to the production of goods or services, such as advertising costs, salaries of sales staff, and office rent.

These costs are expensed immediately in the period they occur and are not included in the calculation of inventory value.