Question

In Principles of Accounting I, we learned the journal entry for depreciation is:

Debit – Depreciation Expense $X,XXX

Credit – Accumulated Depreciation - (asset) $X,XXX

1) How is depreciation recorded differently under job order costing and how would you explain the difference to a non-accountant?

2) Suppose you had to record depreciation of $700 on factory equipment and $225 on office equipment. What would the journal entry look like?

Answer 1

Ans 1.

In case of Job order costing the following Journal entry

is made :

Debit --   Factory Overhead Control A/c   $X,XXX

Credit ---Accumulated Depreciation (asset) $X,XXX

Depreciation on Factor equipment becomes part of Job cost .
In case of Job order costing , the Depreciation on Plan and Equiment
is Charged to Factory Overhead control account . This is done because
there are many cost objects or Job orders to which the Plant & Equipment
depreciation should ultimately be charged, so the depreciation is accumulated
in Factory Overhead Control account . Other indirect expenses like plant rent,
plant insurance , plant maintenance costs are also accumulated in the
Factory Overhead pool and charged to Jobs on a predetrmined rate.
Any excess or shortage remaining in the cost pool adjusted to Cost of Goods Sold
account at the end of the period.

Ans 2.
Depreciation on factory equipment will be charged to factory overhead account
but depreciation on office equipment will go to depreciation expense account
as that will not be part of product cost.
Journal Entry

Account Title	Dr $	Cr $
Factory Overhead Control A/c	$                                     700.00
Accumulated Depreciation -Factory Equipment		$                             700.00
Depreciation Expense -Office Equipment	$                                     225.00
Accumulated Depreciation -Office Equipment		$                             225.00