Product cost vs period cost

What is a product cost versus a period cost? Let’s discuss the accounting concepts product cost and period cost with some easy to understand examples.

⏱️TIMESTAMPS⏱️
0:00 Introduction
0:30 Product cost vs period cost definition
0:48 Product cost vs period cost examples
2:29 Product cost in cost accounting
3:21 Product cost and period cost in the income statement

Product costs include all the costs that are involved in acquiring or making product. Product costs are viewed as "attaching" to units of product as the goods are purchased or manufactured. Inventory is an asset on the balance sheet. This is why product costs are sometimes called “inventoriable costs”, they remain attached as the goods go into inventory awaiting sale.

Period costs are expensed on the income statement in the period in which they are incurred. Period costs are not a necessary part of the manufacturing process. As a result, period costs cannot be assigned to the products or to the cost of inventory.

Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business and #accounting vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investing decisions. Philip delivers #financetraining in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!