Under standard backflush costing all standard costs are initially charged to Cost of Goods Sold and, if any inventories exist at the end of the period, a portion of the current period standard costs originally charged to Cost of Goods Sold is transferred to the respective inventory accounts as an end-of-period adjustment.

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Backflush costing simplifies the accounting process by initially charging all costs to Cost of Goods Sold and then adjusting for any inventory at the end of the period by allocating a portion of these costs back to inventory, reflecting the use of standard costs in this process.

Under Standard Backflush Costing All Standard Costs Are Initially Charged