Lesson-1 on Accounting

Question: What is Cost of Goods Sold?

Answer:

Cost of goods sold for Trading concern:

   

Cost of Goods Sold = Beginning Inventory + Purchase – Ending Inventory

Cost of goods sold for Manufacturing concern:

Cost of Goods Sold = Beginning finished goods Inventory + Cost of goods manufactured – Ending finishing goods

Question: What it Gross Profit?

Answer:

Gross profit = Net sales – Cost of goods sold

Question: What is Net Profit ?

Answer:

Net Profit = Gross profit – Total operating expenses

Question: What is Prime Cost?

Answer:

Prime Cost = Direct Material + Direct Wages + Other Direct expenses

Question: What   is Conversion cost?

Answer:

Conversion cost = Wages + Other direct production costs + Production overhead.

Question: What is the difference between Product Cost and Period Cost?

Answer:

Product costs: Product costs include all cost the costs that are involved in acquiring or making a product. In the case of manufacturing good, these costs consist of direct materials, direct labor and manufacturing overhead.

Period Cost: Period costs are all the costs that are not included in product costs. These costs are expensed on the income statement in the period in which they are incurred.

Question: What is Fixed cost?

Answer:

Cost that remains constant ,in total, regardless  of changed in the level of activity within the relevant range.

Question: What is relevant range?

Answer: The range of activity within which assumptions about variable and fixed cost behavior are valid.

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