A company that uses a job order cost accounting system would make the following entry to record the flow of direct materials into production:
A) debit Goods in Process Inventory, credit Cost of Goods Sold.
B) debit Goods in Process Inventory, credit Raw Materials Inventory.
C) debit Goods in Process Inventory, credit Factory Overhead.
D) debit Factory Overhead, credit Raw Materials Inventory.
E) debit Finished Goods Inventory, credit Raw Materials Inventory.

Question

Quizplus · Accepted Answer

A job order cost accounting system tracks the cost of materials, labor, and overhead for each individual job. When direct materials are purchased and flow into production, the Goods in Process Inventory account is increased. The Raw Materials Inventory account is decreased because the raw materials have been transferred to the production process. Therefore, the correct entry to record the flow of direct materials into production is to debit Goods in Process Inventory and credit Raw Materials Inventory. Choice B is the only option that reflects this accounting treatment.

A Company That Uses a Job Order Cost Accounting System