Job order Costing Journal Entries

This video shows how to record journal entries to account for the flow of costs when a manufacturer uses Job-order Costing.

A journal entry is made to record the purchase of raw materials, which is debited to raw materials inventory. When the raw materials are put into production, another journal entry is recorded to transfer the costs from raw materials inventory to Work-in-Process Inventory. When direct labor costs are incurred or manufacturing overhead is applied to jobs, these also increase the Work-in-Process Inventory account. Meanwhile, actual manufacturing overhead costs are debited when incurred.

When a job is finished, the costs of the job are transferred from the Work-in-Process Inventory account to the Finished Goods Inventory account. When the job is sold, the costs of the job are transferred from the Finished Goods Inventory account to Cost of Goods Sold.

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