Cost Method of Accounting


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question 1 of 3

Which of the following situations would use the cost method of accounting?

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1. Under the cost method, profit distributions and dividends for the year should be _____

2. Under the cost method, when are gains on investments recognized?

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About This Quiz & Worksheet

With this short multiple-choice quiz, you can test how much you know about the cost method of accounting. You'll be covering key topics such as an example of when this method would be appropriate and the documentation of dividends and profit distributions.

Quiz & Worksheet Goals

These areas will be addressed on the quiz/worksheet:

  • Gains on investment
  • Impairments on investment assets
  • Difference between investment value and cash proceeds

Skills Practiced

  • Information recall - access the knowledge you've gained regarding an example of the cost method of accounting
  • Making connections - use your understanding of the loss on sale and how it's connected to cash proceeds from a sale
  • Knowledge application - use your knowledge to answer questions about the proper way profit distributions and dividends are documented and the recognition of gains on an investment

Additional Learning

To learn more about accounting, you can read the lesson called Cost Method of Accounting. These key subjects will be the main focus of the lesson:

  • Cost method definition
  • Uses of the cost method
  • Profits for investors
  • Conservative aspect of the cost method