Question

Explain and provide an example for the following job order cost system entries: sale of goods to the customer, administrative costs incurred and selling costs incurred. For each journal entry, identify if the cost being recorded is a product cost or a period cost.

Answer 1

sale of goods to the customer

For Sales of Goods to the Customer consist of two journal entries one for transfer of finished goods to cost of goods sold and second receipt of cash on account of sales to customer

Example

Sales of Goods costing $ 25000 Sold for $50000

Journal Entries

	DR	CR
Cost of Goods sold	25000
Finished Goods		25000
Sales	50000
Cash		50000

Cost of goods sold is product cost

2

Administrative costs

Administrative costs is non-manufacturing costs are not included in cost of goods manufactured but are charged directly to income statement.

Administrative costs are Period cost

Company incured an adminstrative cost of $12000

Journal Entry

	DR	CR
Administrative costs	12000
Cash		12000

selling costs

Selling cost is a non manufacturing cost its is cost incured for selling a product its charged directly to income statement.

Selling cost is Period cost

Sellling Cost of $5000 incurred

Journal Entry

	DR	CR
Selling Expense	5000
Cash		5000