Financial Accounting - 1510 Words

TRIDENT UNIVERSITY Jennifer Lapus MODULE 2/ Case Assignment 2 ACC201 Financial Accounting/Case 2 29 August 2012 Case Assignment: There are three main parts to this case that requires you to prepare and submit a three to five page paper. Please make sure this paper is well organized and covers all of the items below. Part I. * Why is revenue recognition a significant issue? How do we determine when revenues are recorded for accounting purposes? * Explain the difference between a product and period expense. * Discuss the matching concept as it relates to accounting for revenues and inventory. Part II. Refer to the latest annual financial statements for the two following companies: Apple:†¦show more content†¦Product costs or variable costs are all such costs that form part of the inventory. The product cost is the cost of all the different components which make up the product. This may either be the purchase price if the components are bought from outside suppliers, or the combined cost of materials and manufacturing processes if the component is made in-house. Period costs or fixed costs are all such costs that are not incurred in connection to the production. Period expenses are those which occur during a period of time and cannot be easily associated with products or the production process. Period expenses are those for selling and administrative functions – as opposed to manufacturing functions. Examples of period expenses include rent, interest, taxes, sales salaries, etc. Rent on a factory, for instance is constant for a period regardless of how many units were produced in that factory. The next thing I would like to discuss the matching concept as it relates to accounting for revenues and inventory. The matching principle in accounting in general is when you match expenses incurred with the revenue in the same period. When you sell merchandise from the Merchandise Inventory account, you are generating revenue but are also giving up some merchandise you had to create that revenue. Thus the matching principle dictates that you match the cost of the inventory sold in the form of CostShow MoreRelatedFinancial Accounting And Managerial Accounting1613 Words   |  7 PagesIntroduction: Both financial accounting and managerial accounting provide important information about the business process. On the one hand, financial accounting provides only financial information to its internal users and external users. On the other hand, managerial accounting basically communicates about financial and non-financial information with internal users such as managers, employees and own ers of the company. 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