Podcast
Questions and Answers
What account is debited when raw materials are purchased?
What account is debited when raw materials are purchased?
- Accounts Payable
- Cash
- Raw Materials Inventory (correct)
- Finished Goods Inventory
What is credited when raw materials are purchased on account?
What is credited when raw materials are purchased on account?
- Goods in Process Inventory
- Accounts Payable (correct)
- Raw Materials Inventory
- Cash
What happens to raw materials inventory when raw materials are applied to goods in process?
What happens to raw materials inventory when raw materials are applied to goods in process?
Decreases
What account is debited when direct labor is applied to goods in process?
What account is debited when direct labor is applied to goods in process?
Indirect labor is applied to Goods in Process.
Indirect labor is applied to Goods in Process.
Which of the following accounts is debited for various indirect product costs?
Which of the following accounts is debited for various indirect product costs?
What should be done to goods in process once they are completed?
What should be done to goods in process once they are completed?
When finished goods are sold, what account is debited to record the sale?
When finished goods are sold, what account is debited to record the sale?
What account is credited when finished goods are sold?
What account is credited when finished goods are sold?
Overhead is based on actual costs.
Overhead is based on actual costs.
Flashcards
Apply Raw Materials
Apply Raw Materials
Transferring raw materials into production, decreasing Raw Materials Inventory and increasing Goods In Process.
Raw Materials Purchase
Raw Materials Purchase
Recording the purchase of raw materials needed for production.
Direct Labor Cost
Direct Labor Cost
Cost of workers directly involved in producing goods.
Apply Direct Labor
Apply Direct Labor
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Factory Overhead
Factory Overhead
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Apply Overhead
Apply Overhead
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Transfer to Finished Goods
Transfer to Finished Goods
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Sell Finished Goods
Sell Finished Goods
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Cost of Goods Sold
Cost of Goods Sold
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Overhead Variance
Overhead Variance
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Study Notes
Manufacturing Transactions
- Purchase Raw Materials: Debit Raw Materials Inventory, credit Accounts Payable (or Cash)
- Apply Raw Materials to Goods in Process: Debit Goods in Process Inventory, credit Raw Materials Inventory
- Pay Wages for Direct Labor: Debit Factory Payroll, credit Cash
- Apply Direct Labor to Goods in Process: Debit Goods in Process Inventory, credit Factory Payroll
- Apply Overhead to Goods in Process: Debit Goods in Process Inventory, credit Factory Overhead
- Sell Finished Goods: Debit Cash (or Accounts Receivable), credit Sales Revenue; Debit Cost of Goods Sold, credit Finished Goods Inventory
Journal Entries for Manufacturing Companies
- Purchase Raw Materials: Debit Raw Materials Inventory. Credit Accounts Payable (or cash).
- Apply Raw Materials: Debit Goods in Process Inventory, Credit Raw Materials Inventory
- Incur Labor Costs: Debit Factory Payroll, Credit Cash. (Important note: Factory labor is a product cost, not a period cost).
- Apply Factory Payroll – Direct Labor: Debit Goods in Process Inventory, Credit Factory Payroll. Use Time Tickets as source document.
- Apply Factory Payroll – Indirect Labor: Debit Factory Overhead, Credit Factory Payroll. Use Time Tickets as source document.
- Incur Various Indirect Product Costs: Debit Factory Overhead for total cost; Credit appropriate account (e.g. Utilities Payable, Accounts Payable).
- Apply Overhead to Goods in Process: Debit Goods in Process Inventory, credit Factory Overhead. Uses Predetermined Overhead Application Rate.
- Transfer Completed Goods: Debit Finished Goods Inventory, Credit Goods in Process Inventory
- Sell Finished Goods: Debit Cash (or Accounts Receivable), credit Sales Revenue; Debit Cost of Goods Sold, credit Finished Goods Inventory
Overhead
- Overhead is accumulated in Factory Overhead account and then applied to Goods in Process
- The balance at the end of the accounting period may be underapplied or overapplied.
- Underapplied overhead: Debit Cost of Goods Sold, Credit Factory Overhead
- Overapplied overhead: Debit Factory Overhead, Credit Cost of Goods Sold
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Description
Test your knowledge on various manufacturing transactions and journal entries in accounting. This quiz covers important aspects such as raw materials, labor costs, overhead, and the selling of finished goods. Perfect for accounting students and professionals seeking to refresh their understanding of manufacturing processes.
