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Hi,Mike.
I was confused about the question on page 37 NO.8.10 in BPP.I don’t understand why the stores control,wages control and expense creditors should be debited in the production overhead control account.Also,could you explain to me what is WIP and what it is used for.
Thank you so much!We do not have Mike as our tutor for Paper F2, and so he will not be answering!
When (for example) we pay wages, the double entry is to credit cash and debit wages.
Some of these wages will be overhead wages, and so we transfer then to the overheads account – credit wages and debit overheads.
The same applies to inventory (stores) and to expenses that relate to overheads.So the total of the debit side of overheads is the total overhead cost.
Since overheads are part of the total cost of the work-in-progress (the goods being manufactured) they are then transferred to the work-in-progress account at standard cost.
The balance on the account is the over of under absorption of the overheads (because the actual overheads were more or less than the standard cost).Also in the WIP account would appear the materials and direct labour cost, so the total on the WIP account will be the total cost of goods produced.
Do not worry too much about the t-accounts – there will be little or no questions about this in the real exam.
Our free lectures cover everything you need to be able to pass the exam well.
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