Accounting of Costs for a Job

In a Job Costing System, each job is treated as a separate cost unit, and all related costs—direct materials, direct labor, and applied overheads—are accumulated under that job. These costs are recorded through accounting entries in the books to ensure proper tracking and financial reporting.

The cost accounting process in job costing is divided into the following stages:

1. Purchase of Raw Materials

Raw materials are first purchased and stored in the Raw Materials Inventory account.

Journal Entry:

2. Issue of Direct Materials to Job

When materials are issued specifically for a job, the cost is transferred to the Work-in-Progress (WIP) Inventory account.

Journal Entry:

3. Issue of Indirect Materials

Materials not directly traceable to a specific job (like lubricants) are treated as factory overhead.

Journal Entry:

4. Direct Labor Charges

Wages paid to employees working on a specific job are considered direct labor and charged to the job account.

Journal Entry:

5. Indirect Labor Charges

Wages paid to factory supervisors, cleaners, or other indirect staff are considered overheads.

Journal Entry:

6. Overhead Applied to Job

Overhead costs are applied to jobs using a predetermined overhead rate based on labor hours or machine hours.

Journal Entry:

7. Job Completion

Once the job is complete, the total cost is transferred from Work-in-Progress to Finished Goods Inventory.

Journal Entry:

8. Sale of Job

If the job is sold, the sales revenue is recorded, and the cost of goods sold is transferred.

a. Record Sale:

b. Transfer Cost to Cost of Goods Sold (COGS):

Summary Table of Job Cost Accounting Entries