Operation costing employs aspects of both job-order and process costing. Conversion costs are assigned to batches like in process costing, while material costs are charged to batches like in job-order costing. The document then provides examples of typical accounting entries for a process costing system, including entries to record the purchase and use of raw materials, application of direct labor and overhead costs, transfer of goods between departments, transfer of completed goods to finished goods inventory, recording of sales, and cost of goods sold.

1. Operation Costing
Operation costing employs some aspects
of both job-order and process costing.
Conversion costs
assigned to batches
as in process costing.
Conversion costs
assigned to batches
as in process costing.
Material Costs Charged
to batches as in
job-order costing.
Material Costs Charged
to batches as in
job-order costing.
Job-order
Costing
Process
Costing
Operation Costing
(Products produced in batches)

2. I’m going to end this chapter and
process some leisure time, unless
you want to see some journal
entries.
Do You Want to See
Journal Entries?

3. Process Costing
Typical Accounting Entries
Let’s look at the accounting
journal entries for a process
cost system. We’ll omit the
numbers so that we can focus
on concepts.

4. Process Costing
Typical Accounting Entries
GENERAL JOURNAL Page 4
Date Description
Post.
Ref. Debit Credit
Raw Materials XXXXX
Accounts Payable XXXXX
To record the purchase of material.

5. Process Costing
Typical Accounting Entries
GENERAL JOURNAL Page 4
Date Description
Post.
Ref. Debit Credit
Raw Materials XXXXX
Accounts Payable XXXXX
To record the purchase of material.
Work in Process - Department A XXXXX
Work in Process - Department B XXXXX
Raw Materials XXXXX
To record the use of direct material.

6. Process Costing
Typical Accounting Entries
GENERAL JOURNAL Page 4
Date Description
Post.
Ref. Debit Credit
Work in Process - Department A XXXXX
Work in Process - Department B XXXXX
Salaries and Wages Payable XXXXX
To record direct labor costs.

7. Process Costing
Typical Accounting Entries
GENERAL JOURNAL Page 4
Date Description
Post.
Ref. Debit Credit
Work in Process - Department A XXXXX
Work in Process - Department B XXXXX
Manufacturing Overhead XXXXX
To apply overhead to departments.

8. Process Costing
Typical Accounting Entries
GENERAL JOURNAL Page 4
Date Description
Post.
Ref. Debit Credit
Work in Process - Department B XXXXX
Work in Process - Department A XXXXX
To record the transfer of goods from
Department A to Department B.

9. Process Costing
Typical Accounting Entries
GENERAL JOURNAL Page 4
Date Description
Post.
Ref. Debit Credit
Finished Goods XXXXX
Work in Process - Department B XXXXX
To record the completion of goods
and their transfer from Department B
to finished goods inventory.

10. Process Costing
Typical Accounting Entries
GENERAL JOURNAL Page 4
Date Description
Post.
Ref. Debit Credit
Accounts Receivable XXXXX
Sales XXXXX
To record sales on account.
Cost of Goods Sold XXXXX
Finished Goods XXXXX
To record cost of goods sold.