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Hello All,
I have the following question from BPP Revision Kit.
Question 1] In an integrated cost and financial accounting system, what would the accounting entries at the end of the period for production overhead over-absorbed be?
A – Dr Overhead Control Account Cr Work in Progress Account
B – Dr Overhead Control Account Cr Statement of Profit and Loss (Income Statement)
C – Dr Work in Progress Account Cr Overhead Control Account
D – Dr Statement of Profit and Loss (Income Statement) Cr Overhead Control AccountThe answer given by BPP is B. However, I believe the correct answer to be D.
Question 2] In a cost bookkeeping system what would be the entry for the absorption of production overhead?
Debit Credit
A – Cost Ledger Control Account Production Overhead Account
B – Production Overhead Account Work-in-Progress Account
C – Work-in-Progress Account Cost Ledger Control Account
D – Work-in-Progress Account Production Overhead AccountThe answer given by BPP is D. However, I believe the correct answer to be A.
Can someone please verify?
Thanks!
bro u hv to learn double enteries first… make grip on them… the bpp ans of these two ques r abslotuly correct… revise dbl entries n make strong ur concepts
in simple i tell u over absorbd ohs increases profit so it ll b credited to p&l a/c while ohs control a/c ll b debited against it
My dear Lecturer I start MA2 and FA2 so I need to ask you a questions about the difficult chapters.
It should be B.
Assume there is no closing inventory to make it simple. Let’s say actual overheads were $1,000 (CR cash (say) 1,000, Dr OH Control account 1,000), but that $1,200 were absorbed into production (Dr Cost of sales,1,200, Cr OH Control account 1,200)
Cost of sales would then be debited with that 1,200 (no closing inventory) because it has been absorbed into production. However, actual costs were only 1,000 so we have hit profits 200 too hard.
Dr OH control account 200, Cr PL 200.
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