Question

In a job order cost accounting system, the entry to record the flow of direct materials into production is:

a. Debit Work in Process, credit Materials.

b. Debit Factory Overhead, credit Materials.

c. Debit Materials, credit Work in Process.

d. Debit Work in Process, credit Supplies.

Answer 1

Concepts and reason

Journal Entry: This is the primary recording of any transaction which is entered in the financial accounting. First of all, every transaction is put into a journal entry and from there it is posted to different accounts.

Journal entry forms the basis of accounting. If a journal entry is wrong then financial books cannot provide a correct picture of the financials of the entity.

Fundamentals

Rules of debit and credit have been followed for journalizing the various transactions and these are as mentioned below:

 

Debit the Receiver and Credit the Giver: It is used for personal accounts. It indicates when the organization receives something from anyone then, what is received would be debited and the giver would be credited. 

 

Debit what comes in and Credit what goes out: It is used for real accounts. It indicates when the organization purchased or receive any asset then it would be debited and on the other side, when the asset is going out of the organization then, it would be credited.

 

Debit all expenses and losses, credit all incomes and gains: It is used in case of a nominal account, and according to this rule all the expenses and losses incurred by the organization would be debited and on the other side, all the incomes and gain of the organization would be credited.

Work in progress: This is that part of the inventory on which some work has been in done in terms of material and conversion cost but they are not completely manufactured and hence stays in stock and are transferred to next accounting period.

Direct materials: These are the materials which are used in the Production process which constitutes an integral portion of the final product, the cost of which is identifiable and traceable directly to it. The cost of direct material can be directly chargeable to the final product as compared to the indirect material.

Debit Factory Overhead, credit Materials is not used to record the transaction because factory overhead includes all the indirect cost in the production process.

Debit Materials, credit Work in Process is not used to record the transaction because the material will be credited as it is being reduced and it is transferred to work in progress.

Debit Work in Process, credit Supplies is not used to record the transaction because the material is transferred into production. Thus, the material will be credited in the entry.

Debit Work in Process, credit Materials is used to record the transaction because the material is being transferred to the production process that is material is used to transform the goods in the finished product through work in process.

Ans:

Debit Work in Process, credit Materials.