Classification of costs for stock valuation and profit measurement

Matching concept requires that costs are matched with revenue for the purpose of calculating profits.

Closing stocks must be deducted from production costs.

In an organisation with a range of jobs, it is necessary to charge the costs for each individual job.

WIP and finished goods stock valuations are determined by the total of individual job costs.

The total of the costs attached to the incomplete jobs in the finished goods store represents the finished goods stock valuation.

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