Understand the flow of costs in a job-order costing system and prepare appropriate journal entries to record costs.
In Job-order costing, the direct material, direct labor and manufacturing overhead costs are closed with work-in-process account. The cost of work-in-process is closed with finished goods and at the end finished goods account will close with cost of goods sold. The important entries frequently used in job-order costing are discussed below.
· Purchase of raw material
Raw material Debit XXX
Account payable Credit xxxx