So, if the revenues are recognised for an accounting period, then the expenses are also taken into consideration irrespective of the actual movement of cash. These costs occur during a financial year, but they are not considered at the time of valuing the inventory because they are not associated with the purchase and sale of goods.Īccording to the Matching Principle, all expenses are matched with the revenue of a particular period. These costs are charged against the sales revenue for the accounting period in which they take place. The cost which cannot be allocated to the product, but belongs to a particular period is known as Period Cost. An example of such cost is the cost of material, labour, and overheads employed in manufacturing a table. On the other hand, in Marginal Costing only the variable cost is regarded as product cost. Under different costing system, product cost is also different, as in absorption costing both fixed cost and variable cost are considered as Product Cost.
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