TOPIC 3: BASIC JOURNAL ENTRIES – COST ACCOUNTING AND CGS FORMULA

UNDER JOB ORDER COSTING

Job Order Cost Accounting:

Manufacturing Statement Format:

Direct materials, beginning xx

Add: Direct material purchases xx

Equal: Direct materials available for

use xx

Less: Direct materials, end (xx)

Equal: Direct materials used Xx

Add: Direct labor Xx

Add: Factory overhead Xx

Equal: Total manufacturing cost Xx

Add: Work in process, beginning Xx

Equal: Total goods placed in

process Xx

Less: Work in process, end (xx)

Equal: Total goods manufactured Xx

Add: Finished goods, beginning Xx

Equal: Cost of goods available for

sale xx

Less: Finished goods, end (xx)

Equal: Cost of goods sold xx

Transactions Journal entry

1. Material costs are released from raw material (Dr)Work in process inventory (if direct)
inventory
(Dr)Manufacturing overhead (if indirect)

(Cr)Raw materials inventory

2. Time sheet information is also used for payroll (Dr)Work in process inventory (if direct)
preparation
(Dr)Manufacturing overhead (if indirect)

(Cr)Salaries and wages payable

3. Overhead is applied to work in process (Dr)Work in process inventory (if direct)

(Cr)Applied overhead
 EXERCISE 1. : Prepare the necessary journal entries from the following information for Anderson
Company, which uses a perpetual inventory system.

a. Purchased raw material on account, P56,700.

b. Requisitioned raw material for production as follows: direct material-80 percent of

purchases; indirect material-15 percent of purchases.

c. Direct labor wages of P33,100 are accrued as are indirect labor wages of P12,500.

d. Overhead incurred and paid for is P66,900.

e. Overhead is applied to production based on 110 percent of direct labor cost.

f. Goods costing P97,600 were completed during the period.

g. Goods costing P51,320 were sold on account for P77,600.

ANSWER – Exercise 1:

a. Raw Material Inventory 56,700

Accounts Payable 56,700

b. Work in Process Inventory 45,360

Manufacturing Overhead 8,505

Raw Material Inventory 53,865

c. Work in Process Inventory 33,100

Manufacturing Overhead 12,500

Wages Payable 45,600

d. Manufacturing Overhead 66,900

Cash 66,900

e. Work in Process Inventory 36,410

Manufacturing Overhead 36,410

f. Finished Goods Inventory 97,600

Work in Process Inventory 97,600

g. Cost of Goods Sold 51,320

Finished Goods Inventory 51,320

Accounts Receivable 77,600

Sales 77,600