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X Co has recorded the following wages costs for direct production workers for November.
$
Basic pay 70,800
Overtime premium 2,000
Holiday pay 500
Gross wages incurred 73,300
The overtime was not worked for any specific job.What are the accounting entries for these wages costs?
The correct answer is:
Debit: Work in progress account 70,800
Debit: Overhead control account: 2,500
Credit: Wages control account: 73,300I can see the logic in accounting for the holiday pay and OT Premium as indirect and allocating to the overhead Control a/c. I’m trying to understand the Dr and Cr logic. Is it because the wages control a/c is a liability as wages are not yet paid, and the WIP and overhead are expense accounts?
When the wages are first paid, the entry for the whole amount is Credit cash and Debit Wages.
Then the wages are moved from the wages account (so credit wages) to either work-in progress is they are direct wages or to the overheads account if they are indirect wages.
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