Accounting All-in-One For Dummies, with Online Practice, 2nd Edition

Chapter 1

Identifying Costs and Matching Costs with Revenue

IN THIS CHAPTER

Knowing the ins and outs of costs and expenses

Understanding the difference between product and period costs

Figuring out which costs to depreciate

Mulling over revenue recognition

This chapter is your introduction to a company’s tangible assets, which you can touch and feel — they have a physical presence. Tangible assets, also called fixed assets, include property, plant, and equipment (PP&E). Many fixed assets are used for years, and a company relies on a mysterious accounting tool called depreciation to keep its financial statements in line with the reality of how long those assets stay in use.

If you read this entire chapter, depreciation won’t seem so mysterious anymore. This chapter helps you understand what depreciation is and how it connects a business’s costs to its expenses. (Yes, costs and expenses are two different things in the business world.) This chapter also walks you through the information you find in a schedule of depreciation.

Because you match expenses with revenue, this chapter wraps ...