over head recovery

jkc

hi
still a bit wonky on double entry for over heads
in the osbourn books the costs over absorbtion on the credit side
goes into profit and loss debit. but teach says it goes into a gains
account then into profit and loss.

can any one help?

SandyHood

In most organisations:
absorbed over head is debited to WIP and credited to Production Overhead with the under/over absorbed either debited/credited to the Under/Over Absorbed Overhead Account. At the end of the accounting period the balance would then be debited/credited to the P&L.

So if you do not use an Under/Over Absorbed Overhead Account, then the entries would go straight to the P&L.

In other words both your book and your teacher are right

jkc

hi sandy thanks for all your help jkc.