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I do not understand how Job accounts work. The debit and credit side of it.
I am not sure what type of about the job account is. Asset, expense, liability, revenue or equity.
I don’t understand why those items are on credit side.DEBIT
balance
material cost
labor cost
Prod overhead costCREDIT
Material transferred from other account
Material returned from stores
Cost of salesThank you for your help in advance.
You cannot be asked to produce t-accounts in the exam and so most of your question is not relevant for the Paper MA exam.
However I think that either you have mistyped the question or there is a mistake in whichever book you found the question.
We debit the account with all of the costs of the job so that the total is the total cost which is then transferred to the cost of sales account.
If any of the materials were return to (not from) stores or where transferred to (not from) another job, then we credit the account so that the materials left in the total are just the materials that were used on this job.
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