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I have question about under/over absorbed overhead by absorbed accounting method.
How under/over absorbed overhead will be treated to profit/loss acc?
If it is over absorbed overhead, it will need to increase profit, because the budgeted OH is higher than the actual OH. is it that right?
And
If it is under absorbed OH, It will need to lower profit, because the budgeted OH is lower than the actual OH. is that right?What does it mean by “Over(under) absorbed OH is a credit(debit) in profit/loss statement”?
I dont understand the underlying procedures of treating over/under absorbed OH in term of ledger entries recording.
Pls explain to me.
Thanks alot.
None of what you have asked is relevant for the Paper F5 exam. You are not asked about the over or under absorbed overheads, and you are certainly never asked for the entires in the ledger accounts!!!
Understanding of it is asked in Paper F2, and if you watch my Paper F2 lectures on this then they do explain (with examples).
For the purpose of thoroughly understand the syllabus I asked the question. I guess I must move it to F2 asking tutor forum.
Thank you for your time.
Although the Paper F2 topics are assumed knowledge for Paper F5, you really would be wasting your time studying over and under absorption.
Our lectures for F5 revise all the Paper F2 topics that are relevant for F5 and are a complete free course – the cover everything needed to be able to pass the exam well.
I would only go back to the F2 lectures if you come across any revision in the F5 lectures that really makes no sense to you (which is very unlikely).
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