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Which of the statements regarding the SOP&L for a limited liability company is correct?
I don’t get the reasoning behind why the following is NOT the answer:
Accounting standards define the expenses which are reported under the heading of ‘COS’
Please provide insight.
They don’t define which expenses – it depends on the nature of the product which expenses are involved in the production.
Sorry but what do you mean by nature? For instance if absorption or marginal costing is used?
The type of product.
The standard says that cost of sales should include all costs of production – it does not define which expenses are costs of production. (The expenses involved in producing paper for example, are going to be different from the expenses involved in producing frozen food!)
Marginal costing is not allowed in financial accounts – it is a management accounting concept but not at all relevant for Paper F3. You should watch the lectures on inventories.
That was a major point. Thanks for clarifying that up! Really appreciate it.
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