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Business LibreTexts

3.4: Journal Entries For the Flow of Production Costs

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  • The journal entries for the flow of production costs are the same with process and job costing.  The cost flow is as follows:


    The corresponding journal entries to the letters in the flow chart are:

    Journal Entries by account flow (see referenced letter)
    Ref Account / Description Debit Credit
    a Raw Materials Inventory X
       Cash or Accounts Payable X
      Purchased raw materials inventory
    b Factory Payroll X
         Wages Payable X
      Record wages earned but unpaid
    c These are examples of some of the entries you may record:
      Manufacturing Overhead X
         Accumulated Depreciation X
      Record depreciation on factory equipment
      Manufacturing Overhead X
         Cash X
      Record factory rent paid with cash
      Manufacturing Overhead X
         Accounts Payable X
      Record factory supplies purchased on credit
    d Work in Process Inventory X
         Raw Materials Inventory X
      Record Direct Materials Used
    e Manufacturing Overhead X
         Raw Materials Inventory X
      Record INDIRECT materials used
    f Work in Process Inventory X
         Factory Payroll X
      Record Direct Labor
    g Manufacturing Overhead X
         Factory Payroll X
      Record INDIRECT labor
    h Work in Process Inventory X
         Manufacturing Overhead X
      Record Overhead APPLIED to production
    i Finished Goods Inventory X
         Work in Process Inventory X
      Record jobs or goods completed (cost of goods manufactured)
    j Cost of goods sold X
         Finished Goods Inventory X
      Record cost of jobs or goods completed AND sold

    For a printable view click job cost flow.