24 Prepare Journal Entries for a Job Order Cost System

Although you have seen the project order costing system using both T-accounts and also task expense sheets, it is crucial to understand how these transactions are recorded in the company’s general ledger.

You are watching: The recording of the jobs completed would include a debit to:

Journal Entries to Move Direct Materials, Direct Labor, and also Overhead into Work in Process

Dinosaur Vinyl keeps track of its inventory and orders added inventory to have on hand once the manufacturing department researches it. This inventory is not connected through any kind of certain project, and the purchases stay in raw products inventory until assigned to a specific task. For example, Dinosaur Vinyl purchased an additional $10,000 of vinyl and also $500 of black ink to finish Macs & Cheese’s billboard. If the purchase is made on account, the entry is as shown:


The production department employees work-related on the sign and send it over to the finishing/assembly department once they have actually completed their percentage of the project.

The direct cost of factory labor consists of the straight wperiods paid to the employees and also all various other payroll costs associated with that labor. Generally, this consists of wperiods and also the payroll taxes and also fringe benefits directly tied to those wperiods. The accounting system demands to store track of the labor and also the other related expenses assigned to a certain job. These records are generally maintained in a time ticket submitted by employees daily.

On April 10, the labor time sheet totaling $30 is taped for Job MAC001 through this entry:


Instraight products additionally have a materials requisition develop, however the costs are taped differently. They are first transferred into manufacturing overhead and also then allocated to occupational in procedure. The enattempt to record the indirect material is to delittle bit manufacturing overhead and also crmodify raw materials inventory.

Indirect labor records are also maintained through time tickets, although such work-related is not directly traceable to a certain task. The difference between direct labor and also instraight labor is that the instraight labor records the delittle bit to manufacturing overhead while the credit is to manufacturing facility wages payable.

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Dinosaur Vinyl’s time tickets indicate that $4,000 in instraight labor prices were incurred during the duration. The enattempt is:


The amount of overhead used to Job MAC001 is $165. The procedure of determining the manufacturing overhead calculation price was explained and demonstrated in Accounting for Manufacturing Overhead. The journal entry to document the production overhead for Job MAC001 is:


Journal Entries to Move Finiburned Goods right into Cost of Goods Sold

When the sale has occurred, the products are transferred to the buyer. The product is moved from the finished items inventory to expense of goods marketed. A corresponding enattempt is likewise made to record the sale. The authorize for Job MAC001 had actually a sales price of $2,000 and also a price of $931. These are the entries to document the move of items and sale to the buyer:


At the end of every year, manufacturing overhead is analyzed, and also an adjusting enattempt is made to dispose of the under- or overused overhead. How would certainly you advise a firm that has had actually overapplied overhead for each of the last five years?

Key Concepts and also Summary

Job cost sheets document the material, labor, and overhead expenses for each job, whereas journal entries actually transport the prices right into the job-related in procedure inventory, the finimelted items inventory, and also expense of goods sold.