subsidiary ledger for Work in

COST ACCOUNTING AND Process Control

CONTROL c. A separate cost sheet is prepared
Job Order Costing for each job
2. Materials Stock Card
a. These records are perpetual book
Overview of the Handouts:
inventory of costs and quantities
1. Job Order Costing
of materials on hand
2. Job Order Costing vs. Process Costing
b. The file of materials stock cards
3. Major Source Documents for Job Order
Costing for unused materials is the
4. Journal Entries subsidiary ledger for Materials
Control
c. A separate stock card is prepared
I. Job Order Costing for each type of material on hand
The job order procedure keeps the costs of 3. Finished Goods Stock Card
various jobs or contracts separate during their a. These records are the perpetual
manufacture or construction. book inventory of costs and
quantities of completed goods
II. Job Order Costing vs. Process held for sale
Costing b. The file of finished goods stock
cards for unsold goods is the
JOB ORDER COSTING PROCESS COSTING subsidiary ledger of Finished
For manufactured For companies that Goods Control
batches of unique produce identical units 4. Factory Overhead Control Cost Record
products or specialized through a series of a. These records accumulate
services, like: processes, like: detailed manufacturing overhead
– Accounting firms – Coca-Cola costs by department
– Music studios – Surfboards b. The file of these records for the
– Building – Medical equipment accounting period is the
contractors subsidiary ledger for Factory
– Health-care Used by large Overhead Control
providers producers of similar 5. Materials Requisition, Time Ticket, and
goods Clock Card
Accumulates cost per a. As the source documents for
batch or job Accumulates cost of charging costs to jobs and
each process needed to department
More prevalent with complete the product b. To aid in fixing responsibility for
service-based
control and usage of materials
companies and with Assigns costs to
and labor
ERP systems products

++distinct units of ++masses of identical IV. Journal Entries

products/services or similar a. Accounting for Materials
products/services Procedures that affect the materials
account:
1. Purchase
2. Issuance (Direct and
Indirect)
III. Major Source Documents for Job
Materials xx
Order Costing Accounts Payable xx
1. Job Order Cost Sheet to record the purchase of materials
a. These records accumulate
product costs of specific units or Work in Process xx
small batches of units for both Materials xx
product costing and control to record the issuance of direct materials
purposes
b. The file of job-order sheet for Factory Overhead Control xx
uncompleted jobs serves as a Materials xx
perpetual book inventory and the to record issuance of indirect materials
 b. Accounting for Labor FOH Applied xxx
The accounting procedures for labor may
be divided into two distinct phases:
1. Collection of payroll data
2. Distribution and allocation of
labor costs to jobs
Salaries Expense xx FOH Control xxx
Withholding Tax Payable xx
SSS Premium Payable xx
PHIC Payable xx
Salaries Payable xx
Less
to record payroll and incurrence of liability
:
Over (Under) Applied FOH xxx
Work in Process xx
Factory Overhead Control xx
Salaries Payable xx If the amount is material, the amount is allocated
to record the distribution of payroll between the work in process, finished goods and
the cost of goods sold accounts.
Salaries Payable xx
Cash xx
to record payment of payroll Factory Overhead Applied xx
Finished Under Applied FOH xx
xx FOH Control xx
Goods
Work in xx
Process Cost of Goods Sold xx
Under Applied FOH xx
d. Finished Goods
c. Accounting for Factory As jobs are completed, the costs for
Overhead corresponding jobs are totaled and are now
There are two accounts used for FOH: Factory transferred to the Finished Goods account.
Overhead Control and Factory Overhead
Applied. When the finished goods are delivered to the
Factory Overhead Control account is used to customers, the sales and cost of goods sold
accumulate actual FOH incurred. are recorded as follows:

Factory Overhead Applied account is used to Accounts Receivable xx

accumulate estimated FOH incurred. This is Sales xx
used even if there is an actual FOH because
at the time that overhead is needed for Cost of Goods Sold xx
costing of jobs completed, actual overhead is Finished Goods xx
not yet available.
If a job is delivered directly to a customer, the
Predetermined FOH Rate is used in FOH entries to record the completion of a job and
applied, this can be computed using any of the the delivery to the customers may be merged
following as a base. into one as follows:
i. Units of production
ii. Direct Material Cost Cost of Goods Sold xx
iii. Direct Labor Hours Work in Process xx
iv. Machine Hours’

Work in Process xx
FOH Applied xx
to record estimated FOH

Over/Under Applied Factory Overhead – the

difference between the actual overhead incurred
and the applied overhead. If the amount is
inconsequential, then the balance is closed
directly to the Cost of Goods Sold account.