31 Prepare journal Entries for a process Costing System

Calculating the costs connected with the assorted processes in ~ a procedure costing mechanism is just a component of the bookkeeping process. Journal entries are offered to record and report the financial info relating come the transactions. The example that complies with illustrates how the newspaper entries reflect the process costing system by recording the flow of goods and costs through the process costing environment.

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Purchased products for multiple Departments

Each department within absent City Percussion has a separate work in procedure inventory account. Raw products totaling $33,500 to be ordered before being requisitioned by every department: $25,000 because that the shaping department and also $8,500 for the packaging department. The July 1 journal entry to record the purchase on account is:


During July, the packaging room requisitioned $2,000 in direct material and also overhead costs for indirect product totaled $300 because that the month that July. The newspaper entry to document the requisition and usage of products is:


During July, the packaging department incurred $13,000 of straight labor costs and indirect job of $1,000. The newspaper entry to record the labor prices is:


Rock City Percussion established that an equipment hours is the appropriate base come use when allocating overhead. The estimated yearly overhead cost is $340,000 per year. The was likewise estimated the the total maker hours will certainly be 34,000 hours, for this reason the allocation rate is computed as:


The finishing department supplied 910 an equipment hours, and with one overhead application rate of $10 per straight labor hour, the newspaper entry to record the overhead allocation is:


Transferred products from the Packaging room to perfect Goods

The computation that inventory for the packaging room is shown in (Figure).


Recording the price of items Sold the end of the Finished items Inventory

Each unit is a package of 2 drumsticks that expense $8.40 come make and sells because that $24.99. There space two transactions once recording a sale. One entry is to carry the inventory native finished items inventory to cost of goods sold and also is at the cost of the product. The second transaction is to record the revenue at the sales price. The link entry to record both transactions because that the sale of 500 units on account is:


The importance of properly recording the production process is shown in this report on occupational in procedure inventory indigenous InventoryOps.com.

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Key Concepts and also Summary

Traditional newspaper entries show the purchase of material and the occurs of overhead costs.Each department records the transport of material from the storeroom into production, its straight labor costs, the application of overhead, and the move of items to the next department or perfect goods.The value of the inventory moved to the following department or to perfect goods equals the amount listed as moved on the production cost report.