cost bookkeeping

System · November 2003

Hi Does anyone know an easy way of remembering cost bookkeeping? I can do the different variances, but when it comes to the bookkeeping for WIP, Raw Materials and Production Overheads etc. I am totally confused. I know that the variances have their own accounts, but I don't know where the double entry goes, or when you use the raw materials & WIP accounts. Will we need to know this in a lot of detail? Any help would be great-thanks. Ann

System · November 2003

cost bookkeeping

Hi Im doing RCI (old standards) and the cost book-keeping exrcises in past exams have been based arround completing a journal. With variances, standard cost is Dr to the relevant expense account and the FULL amount is Cr to creditors. The variance is then Dr or Cr to the relvant variance account. Remember: an adverse variance is an expense so a Dr in the accounts, while a favourable variance reduces expenses so is a Cr entry. Remeber Dr =expenses, Cr=can reduce expenses Hope this helps Neil

System · November 2003

cost bookkeeping

Consider the raw materials a/c. As you buy stock the journal is... Debit stock a/c, actual cost Credit creditors, same amount As you issue stock tp WIP..... Debit WIP with the Standard cost of stock Credit stock account (same amount) When you close off the account... Debit the Trial Balance with the closing balance of stock at standard cost Credit the stock account with same amount The balancing figure in the stockaccount is the materials variance, the double entry is to the variance account.

System · November 2003

cost bookkeeping

This is interesting, as I just had a chit-chat to my tutor for RCI about how exactly variances are recorded. It seems that there are several ways of recording the price variances, though we both agree that usage variances should be extracted in the WIP account. She prefers to extract price variances once the actual costs are recorded in the relevant accounts, whilst I would prefer to extract them beforehand, so these accounts would show only standard costs. If there are any tutors out there who would be able to confirm whether both methods are acceptable, or just one or the other, I would appreciate it myself as I did not receive a definite "this is how you do it" answer. At the time of purchase your entry would be something like Dr Stock (standard cost) Cr Creditors (with full amount) Dr / Cr Variance with difference (which is the price variance) The other option seems to be to Dr Stock (full cost) Cr Creditors (full cost) and then Dr/Cr Stock with Mat Price Variance Dr/Cr Variance account with Mat Price Variance At the time of transfer to WIP Dr WIP with stock received at standard cost Cr Stock with stock issued at standard cost (These should be the same) Labour Entries Dr WIP with standard Labour Cost Cr Wages control A/C / Liability Account with actual amount Dr / Cr variance account with difference (which is the labour rate variance) Again, there seems to be another option at this point: Dr WIP with actual labour cost Cr Wages Control / Liability Account with actual cost and then Dr/Cr WIP with Labour Rate Variance Dr/CR Variance account with Labour Rate Variance At the time of transfer to Finished Goods Dr Finished Goods with the value of Finished Goods Cr WIP with the value of Finished Goods at standard cost (not actual amounts used at standard cost) Dr / Cr Variance with Labour Efficiency and Material Usage variances, which should be the difference. If I got these wrong I'll be linched alive, won't I ?

Good luck with the exams. Edit

System · November 2003

cost bookkeeping

I follow the logic of your suggestions and your method will give the correct answers but, by charging actual cost to the stock, labour and overhead costs, crediting them with standard costs for the WIP transfer, valuing closing stock at standard cost and transferring finished goods out of WIP at standard cost, all the variances will be balancing figures rather than calculated ones. In addition, the flow of the cost information mirrors the actual production process, which should help in the visualisation process.

System · November 2003

cost bookkeeping

I guess the only issue I have with your method is that it doesn't straightaway show price / rate variances(unless you calculate them at the beginning, which brings you back to calculated figures). I think my logic also follows the flow of process. Just out of curiosity, are you a student or a tutor? We must be getting poor Granby11 confused... Edit

System · November 2003

cost bookkeeping

Slightly less confused, but I have printed all the answers off & am now going to try to understand them!! Wish me luck. Thanks for your help.

System · November 2003

cost bookkeeping

I lectured at Llandrillo College, N.Wales for 6 years. I am now a senior manager in Chester.

System · November 2003

cost bookkeeping

Bryan, you are a lucky person to have lived in North Wales. I lived in Mid Wales for a while (the famous cosmopolitan Newtown) and would happily move back any day. Let's hope Granby11 understands it all now. Edit

System · November 2003

cost bookkeeping

ann are u doing new or old standards??? yvette

cost bookkeeping

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