## Classifications under Stock Valuation & Profit Computation
For the purpose of valuing stock and computing profit, costs are classified in four ways (A1–A4). The recurring question behind all of them is: does this cost stay on the balance sheet (in stock) or go to the P&L now?
### A1 — Expired vs Unexpired Cost
| Type | Meaning |
|---|---|
| Expired Cost | Cost charged against revenue (i.e. it has been 'used up' and hits the P&L). |
| Unexpired Cost | Cost carried forward to the next accounting period through stocks (still an asset). |
### A2 — Product vs Period Cost
| Type | Meaning |
|---|---|
| Product Cost | Cost considered for Stock Valuation (attaches to the product, carried in inventory until sold). |
| Period Cost | Cost not considered for Stock Valuation; it expires fully in the current period. |
### A3 — Manufacturing, Administrative, Selling & Distribution Costs
- Manufacturing Costs: incurred from the purchase of raw materials till the primary packing of finished goods — i.e. all costs incurred inside the factory. Comprise Material Costs + Labour Costs + Production Overheads.
- Administrative Costs: incurred on activities relating to the general management and administration of the entity.
- Selling Costs: expenses related to the sale of products/services — all indirect expenses incurred in selling.
- Distribution Costs: costs of handling a product/service from the time it is ready for dispatch until it reaches the ultimate consumer.
### A4 — Job Cost vs Unit Cost
| Type | Meaning |
|---|---|
| Job Costing | Traces costs to specific jobs, contracts, or lots — costs ascertained on an individual basis. |
| Unit Costing | Collects costs of a period to produce goods; per-unit cost ascertained on an average basis. |
### Tying it together
A1, A2 and A3 are really three angles on the same question. Product costs = unexpired manufacturing costs that stay in stock; period costs = expired costs (typically admin, selling & distribution) that hit the P&L immediately. A4 is a separate dimension — it asks how costs are accumulated (individually vs averaged).