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When we charged overhead absorbed so we debit Work In Progress account and credit Production Overhead account.
What is the reason of doing this? Please help me, professor.When production overheads are incurred, the first entry would be something like:
Dr Production overheads
Cr Cash.Production overheads are the absorbed into production at a predetermined overhead absorption rate (ie added to production costs) as each unit is made so:
Dr WiP (or perhaps finished goods)
Cr Production overheadsWe debit work in progress to charge production overhead absorbed in Cost of Goods Sold?
You Dr WiP to ensure the correct costs are accumulated for units made. If the goods are later sold, this cost will be transferred to Cost of goods sold.
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