unit 6 overhead wip

valentino46 Well-KnownRegistered Posts: 124
hi guys,

has anyone got an easy way of remembering how to post overheads to WIP etc




  • Dipak Thanki
    Dipak Thanki Well-Known Registered Posts: 135
    Ooops, I got it wrong =P.
  • sdv
    sdv Experienced Mentor Registered Posts: 585

    has anyone got an easy way of remembering how to post overheads to WIP etc


    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


    Debit Process Account (WIP)............. £1000

    Credit Overheads Control a/c ........................£800
    Credit OVER/UNDER absorbed a/c..................£200

    I hope this helps
  • valentino46
    valentino46 Well-Known Registered Posts: 124
    thanks sdv, thats made it a lot clearer.

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