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AAT Level 3 (Level 6 in Scotland)
unit 6 overhead wip
valentino46
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March 2010
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AAT Level 3 (Level 6 in Scotland)
hi guys,
has anyone got an easy way of remembering how to post overheads to WIP etc
cheers
rob
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Dipak Thanki
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March 2010
Ooops, I got it wrong =P.
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sdv
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March 2010
valentino46
wrote:
»
has anyone got an easy way of remembering how to post overheads to WIP etc
rob
Think of your WIP a/c as Process account.
The input (DEBIT) in the process account is
Material (Actual Cost = Variable)
Labour (Actual Cost = Variable)
Overheads (Absorbed per Hours/Unit based on BUDGETED costs)
and the output (CREDIT) is the finished goods.
ABSORBED Overheads are DEBITED in the process account (WIP) and CREDITED in the OVERHEAD CONTROL account.
ACTUAL Overheads are debited in the OVERHEAD CONTROL account.
The Difference in the Overhead control account is either over/under absorbed that gets transfered to profit and loss account.
However, in your skills test Over/under Absorption is not transfered from the contol a/c instead the journal is done in the following way.
Say ABSORBED Overheads is £1000
ACTUAL Overheads is £800
Therefore OVER ABSORBED (Profit = Credit) is £200
The JOURNAL
Debit Process Account (WIP)............. £1000
Credit Overheads Control a/c ........................£800
Credit OVER/UNDER absorbed a/c..................£200
I hope this helps
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valentino46
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March 2010
thanks sdv, thats made it a lot clearer.
rob
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Think of your WIP a/c as Process account.
The input (DEBIT) in the process account is
Material (Actual Cost = Variable)
Labour (Actual Cost = Variable)
Overheads (Absorbed per Hours/Unit based on BUDGETED costs)
and the output (CREDIT) is the finished goods.
ABSORBED Overheads are DEBITED in the process account (WIP) and CREDITED in the OVERHEAD CONTROL account.
ACTUAL Overheads are debited in the OVERHEAD CONTROL account.
The Difference in the Overhead control account is either over/under absorbed that gets transfered to profit and loss account.
However, in your skills test Over/under Absorption is not transfered from the contol a/c instead the journal is done in the following way.
Say ABSORBED Overheads is £1000
ACTUAL Overheads is £800
Therefore OVER ABSORBED (Profit = Credit) is £200
The JOURNAL
Debit Process Account (WIP)............. £1000
Credit Overheads Control a/c ........................£800
Credit OVER/UNDER absorbed a/c..................£200
I hope this helps
rob