Cost

Cost Accounting and Control

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"Humans like to consider everything as linear, when in reality everything is cyclic." Robert Black

Cost Accounting Cycle

Learning Objectives

• Understand the cost accounting cycle

  
  

• Distinguish between and account for direct and indirect materials and labor as they are used in production process

• Prepare the different income statement of the three types of entity

Cost Accounting Cycle

Typical cycle of operations of a firm:

1. Procurement 

2. Production

3. Warehousing

4. Selling

Illustration of Accounting for Manufacturing Costs (Materials)

Dr. Materials  

Cr. Accounts Payable         

Dr. Work in Process (Direct Materials) 

Dr. Factory Overhead (Indirect Materials) 

Cr. Materials         

Illustration of Accounting for Manufacturing Costs (Labor)

Dr. Payroll 

Cr. Wages Payable         

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Dr. Wages Payable 

Cr. Cash          

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Dr. Work in Process (Direct Labor)

Dr. Factory Overhead (Indirect Labor) 

Dr. Selling & Admin Exp (Salaries) 

Cr. Payroll

Illustration of Accounting for Manufacturing Costs (Overhead)

Dr. Factory Overhead (Depr. Bldg) 

Dr. Selling & Admin Exp (Depr. Bldg) 

Cr. Accum. Depr. – Bldg         

Dr. Factory Overhead (Utilities) 

Dr. Selling & Admin Exp (Utilities) 

Cr. Accounts Payable          

Dr. Work in Process 

Cr. Factory Overhead  

Illustration of Accounting for Manufacturing Costs (Finished Goods and sales)

Dr. Finished Goods 

Cr. Work in Process  

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Dr Accounts Receivable /Cash

Cr. Sales         

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Dr. Cost of Goods Sold

Cr. Finished Goods               

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Income Statement of Different Industry - Cost of Good Solds

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Merchandising:

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​Beginning merchandise inventory

Plus: purchases

Merchandise available for sale

Less: ending merchandise inventory

Cost of good sold

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Income Statement of Different Industry - Cost of Good Solds

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Manufacturing:

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Beginning FINISHED GOODS inventory

Plus: cost of goods manufactured

Goods available for sale

Less: ending finished goods inventory

Cost of good sold

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Cost of Goods Manufactured

Materials Inventory, June 1                                                       

 Add Materials Purchases                                      

 Less Materials Inventory, June 30

Less Indirect Materials Used                                                 

Direct Materials Used                                                                          

Direct Labor                                                                          

Factory Overhead Applied                                                                        

Total Manufacturing Cost                                                                              

Add Work in Process Inventory, June 1

Total Cost of Goods Placed in Process                                                                    

Less Work in Process Inventory, June 30

Cost of Goods Manufactured   

Financial Position of Different Industry - Current Assets

Merchandising:

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Cash

Accounts Receivables

Merchandise Inventory

Financial Position of Different Industry- Current Assets

Manufacuring:

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​Cash

Accounts Receivables

Inventories:

---Materials

---Work In Process

---Finished Goods

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Open Ended

Go over the Progress Check and key in your answer in the google classroom. You have 10 mins to do it.

Thank you and have a nice day!

See you next meeting.

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