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Cost Accounting Cycle

The document describes the cost accounting cycle for a manufacturing company. It discusses the different inventory accounts including materials, work in process, and finished goods. It also covers the elements of manufacturing costs such as direct materials, direct labor, and factory overhead. The cycle shows the flow of costs from purchasing materials to the production process to completing goods and selling the finished products. Key steps include issuing materials to production, recording labor costs, applying overhead, completing goods, selling products, and collecting payment.

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Jericho Pagsuguiron
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113 views21 pages

Cost Accounting Cycle

The document describes the cost accounting cycle for a manufacturing company. It discusses the different inventory accounts including materials, work in process, and finished goods. It also covers the elements of manufacturing costs such as direct materials, direct labor, and factory overhead. The cycle shows the flow of costs from purchasing materials to the production process to completing goods and selling the finished products. Key steps include issuing materials to production, recording labor costs, applying overhead, completing goods, selling products, and collecting payment.

Uploaded by

Jericho Pagsuguiron
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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COST ACCOUNTING

CYCLE
Maria Cristina P. Obeso, CPA, MBA
MANUFACTURING INVENTORY ACCOUNTS

 MATERIALS INVENTORY
 - made up of the balances of materials
and supplies on hand

 WORK IN PROCESS INVENTORY


 cost of goods that were started in process but is not yet
completed

FINISHED GOODS INVENTORY


- cost of goods already completed but not yet sold
ELEMENTS OF MANUFACTURING
COST

 DIRECT MATERIALS

 DIRECT LABOR

 FACTORY OVERHEAD
MANUFACTURING COST FLOW
DIRECT
MATERIALS

DIRECT WORK IN FINISHED COST OF


LABOR PROCESS GOODS GOODS SOLD

FACTORY
OVERHEAD
FLOW OF COST IN A MERCHANDISING
COMPANY
FLOW OF COST IN A
MANUFACTURING COMPANY
FLOW OF COST IN A SERVICE
ORGANIZATION
COST ACCOUNTING MODEL FOR A
MANUFACTURING COMPANY
COST ACCTOUNTING CYCLE

◦ Materials are purchased on account at a cost of


50,000

Materials 50,000
 Accounts Payable 50,000
 Direct materials costing P40,000 and indirect
materials costing P1,900 are issued to the
factory

 Work in Process 40,000


 Factory overhead control 1,900
 Materials 41,900
 Total payroll amounted to P36,000 consisting
of P20,000 earned by laborers , P7,000 for
factory supervision, P9,000 for sales and
administrative employees

 Payroll 36,000
 Accrued Payroll 36,000

 Accrued Payroll 36,000


 Cash 36,000
 Recording the distribution or classification of
the payroll

 Work in process 20,000


 Factory overhead control 7,000
 Selling and administrative expenses control 9,000
 Payroll 36,000
 Depreciation expense for the building is
P3,750. The office occupies 1/10 of the
building and the factory occupies 9/10 of the
building

 Factory overhead control 3,375


 Selling and administrative expenses control 375
 Accumulated depr- building 3,750
 Depreciation for machinery and equiment
used in the factory is 2,500

 Factory overhead control 2,500


 Accum. Depr. – machinery and equipment 2,500
 The cost of heat, light and power for the
month was P3,000. 1/10 is allocated to the
office and 9/10 to the factory

 Factory overhead control 2,700


 Selling and administrative expenses control 300
 Accounts payable 3,000
 Miscellaneous expenses for telephone, office
supplies, travel and rental of office furniture
and equipment totaled

 Selling and administrative expenses control 1,500


 Accounts payable 1,500
 Factory overhead is charged to production at
85% of direct labor cost

 Work in process 17,000


 Factory overhead applied 17,000
 Assuming all goods started in process have
been finished

 Finished goods 77,000


 Work in process 77,000

 Direct materials 40,000


 Direct labor 20,000
 Factory overhead 17,000
 77,000
 All the finished goods were sold with a mark-
up of 10,000 pesos on credit

 Accounts receivable 87,000


 Sales 87,000

 Cost of goods sold 77,000


 Finished goods 77,000
 All the accounts receivable were collected in
full

 Cash 87,000
◦ Accounts receivable 87,000
 THANK YOU FOR LISTENING!!!

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