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Manufacturing Accounting
CHAPTER REVIEW
1. Prepare a statement of cost of good manufactured.
The statement of cost of goods manufactured includes the beginning work-in-process
inventory, plus the cost of raw materials used, plus direct labor, plus factory
overhead, less the ending work-in-process inventory.
2. Complete a work sheet for a manufacturing enterprise and journalize closing entries.
A work sheet for a manufacturing company contains an extra pair of columns entitled
“Statement of Cost of Goods Manufactured.” Manufacturing costs— Raw Materials
Purchases, Direct Labor, and Factory Overhead account balances— are recorded in
the Debit column. Debit amounts recorded in the Manufacturing Summary account
(representing the beginning balances of Raw Materials Inventory and Work-inProcess Inventory) are listed in the Statement of Cost of Goods Manufactured Debit
column. Credit amounts recorded in the Manufacturing Summary account
(representing the ending balances of Raw Materials Inventory and Work-in-Process
Inventory) are listed in the Statement of Cost of Goods Manufactured Credit column.
The difference between the Statement of Cost of Goods Manufactured Debit and
Credit columns is the amount of the cost of goods manufactured, and this amount is
recorded as a credit to balance off the columns. The amount of the cost of goods
manufactured is also recorded in the Income Statement Debit column.
3. Define job-order cost accounting system and make the related entries.
A job-order cost accounting system is used by manufacturers producing distinct
products in batches of a specified number of units. Each batch of units is given a joborder number. The costs of production (raw materials, direct labor, and factory
overhead) are debited to the account for that job-order number in the work-in-process
subsidiary ledger. When the job is completed, the Finished Goods Inventory account
is debited and the Work-in-Process Inventory account is credited.
4. Define a process cost accounting system and make the related entries.
A process cost accounting system is used by manufacturers whose production
involves a continuous process. The output consists of homogeneous units. The
production flows from one department to another department. A Work-in-Process
Inventory account is set up for each department to record the costs of production.
The entry to record the passing on of production from one department to another is a
debit to the second department’s Work-in-Process Inventory account and a credit to
the first department’s Work-in-Process Inventory account. Upon completion of the
last stage of production, the entry is a debit to Finished Goods Inventory and a credit
to the last department’s Work-in-Process Inventory account.
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