Cost included in Inventories

  • Product cost (1)
  • Capitalized in inventories account on balance sheet
    • Purchase cost – trade discounts and rebates 
    • Conversion costs: labor + overhead
    • Other costs necessary to bring the inventory to present location and condition
  • Inventory cost (2) 
    • Is capitalized as an asset
    • Expense recognition is delayed until inventory is sold and revenue is recognized