unit 6 overhead wip

valentino46
valentino46 Registered Posts: 124 Dedicated contributor 🦉
hi guys,

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

cheers

rob

Comments

  • Dipak Thanki
    Dipak Thanki Registered Posts: 135 Dedicated contributor 🦉
    Ooops, I got it wrong =P.
  • sdv
    sdv Registered Posts: 585 Epic contributor 🐘

    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
  • valentino46
    valentino46 Registered Posts: 124 Dedicated contributor 🦉
    thanks sdv, thats made it a lot clearer.

    rob
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