journal entries

valentino46

hi guys,

hope every1 enjoying their weekend,

i just need a bit of help with the following on where to post an under absorption when making journal entries, i have under absorbed an overhead by £268 so ive entered the figures into the journal as follows:

debit - WIP AM manufacture £8854
credit - under absorbed overhead AM manufacture account £268
credit - overhead control AM manufacture £8586

im unsure at to whether ive posted these amounts correctly, thanks for any help with this.

cheers

rob

sdv

You will normally have a W-I-P “T” account = where on the debit side you will debit Raw material from Stock; Labour costs from Wages; and ABSORBED overheads from Overheads account

debit - WIP AM manufacture £8854 – This entry appears to be fine

In the Overheads “T” account the ACTUAL overheads expense will be DEBITED and ABSORBED overheads CREDITED.

If the Absorbed overheads is less then Actual Overheads; a DEBIT balance will be brought down which will have to be written off in the Profit & Loss account as an under-absorbed expense. (Vice - versa for a CREDIT balance brought down)

credit - overhead control AM manufacture £8586 – This entry appears to be fine

You appear to be using 2 separate Overheads accounts (Control & Over/Under Absorption), I normally tend to use one combined account.

credit - under absorbed overhead AM manufacture account £268 – This entry appears to be fine

valentino46

thanks sdv,

i got stumped when i was asked to use the control acc ount as im used to using just the overhead account in question.

thanks for your comments

rob