Non-Factory Costs and the Period Concept.

Abstract The article focuses on the non-factory costs and the period concept and an analysis of certain accounting practices in manufacturing enterprises and their effects on reports to marketing management. Sales result in part from marketing effort measured by expenses or costs incurred in periods preceding that in which the sales materialize. Consistently, parts of current marketing costs are related to sales of future periods. If current marketing expenses are matched against current sales, the net income or contribution resulting may be an imperfect measure of operating results. The purpose of the dissertation is to examine these statements critically, through an examination of corporate accounting practices relating marketing costs to sales. Objectives include the identification of marketing activities that give rise to costs affecting sales of future periods, and determination of the extent to which conventional accounting practices in handling marketing costs may give rise to distortion of income. Present business practice, with limited exceptions, is to charge current marketing costs against current sales. This is true whether or not situations occur that cause marketing effort to be directed toward future sales.