.This balance reflects a service provided but not yet paid for - it is an outside claim against the company which will be settled in the following period so it appears in the balance sheet under 'accrued expenses' as a current liability within 'creditors (amounts due within one year)'. Conversely, where an expense has been paid in advance, only the payments due to the current year are included in the profit and loss account, the remaining balance (prepaid) will benefit the next period and is therefore recorded on the balance sheet under 'prepayments' as a current asset within 'debtors'. Stock value includes all (direct and indirect) manufacturing costs.

All production costs (direct and indirect) are considered part of the product cost that is used for stock valuation for financial accounting profit measurement purposes.

These 'full product costs' will appear in the profit and loss account within 'cost of sales' only when the product is sold. Any products unsold at the end of the period will be included in the current asset 'stocks' and appear on the balance sheet.

Depreciation

Although depreciation may involve anticipating an asset's loss of value before an objective confirmation of its actual value is determined (see under 'Prudence') it also serves a matching purpose by assigning the original (historic) cost of a fixed asset to the individual years of its useful life in which it helps to earn revenues.