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Raw materials purchases are debited to Raw materials inventory. Direct materials used are debited to...

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Accounting

Raw materials purchases are debited to Raw materials inventory. Direct materials used are debited to Work in process inventory and credited to Raw materials inventory. Indirect materials used are debited to Factory overhead and credited to Raw materials inventory. Direct labor used is debited to Work in process inventory and credited to Factory wages payable. Indirect labor used is debited to Factory overhead and credited to Factory wages payable. Other actual factory overhead costs are debited to Factory overhead. Estimated overhead costs are allocated, using a predetermined overhead rate, to the different processes. This allocated amount is credited to the Factory Overhead account and debited to the Work in Process Inventory account for each separate process. As units are finished, Finished goods inventory is debited and Work in process is credited. Units sold are debited to Cost of goods sold and credited to Finished goods inventory.
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