Explain the Way in Which Costs Flow Through the Merchandise

question 169

Essay

Explain the way in which costs flow through the merchandise inventory account to a merchandiser's income statement.

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Definitions:

Incurred Expense

Expenses that have been recognized in the accounting period in which they are incurred, regardless of when the payment is made.

Adjusting Process

An analysis and updating of the accounts when financial statements are prepared.

Revenue Recognition Principle

A concept of accounting that states that revenues are recorded when earned, which is when the services have been performed or products have been delivered to customers.

Recorded

The action of entering financial transactions into the accounting records of a business.