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    AFAR Backflush Costing

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    Jaybie John Palco Eralino
    Backflush costing is a streamlined cost accounting system used for Just-in-Time inventory systems. It accumulates conversion costs in a conversion cost account and applies them to production upon completion based on standard costs. Raw materials are recorded in a Raw and In Process Inventory account instead of separate raw materials and work in process accounts. Conversion costs are then backflushed from the conversion cost account to cost of goods sold upon completion of production. The document provides examples of alternative journal entries that can be used under different production and sales scenarios within a backflush costing system.

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    AFAR Backflush Costing

    Uploaded by

    Jaybie John Palco Eralino
    144 views2 pages
    Backflush costing is a streamlined cost accounting system used for Just-in-Time inventory systems. It accumulates conversion costs in a conversion cost account and applies them to production upon completion based on standard costs. Raw materials are recorded in a Raw and In Process Inventory account instead of separate raw materials and work in process accounts. Conversion costs are then backflushed from the conversion cost account to cost of goods sold upon completion of production. The document provides examples of alternative journal entries that can be used under different production and sales scenarios within a backflush costing system.

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    Afar

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    Backflush costing is a streamlined cost accounting system used for Just-in-Time inventory systems. It accumulates conversion costs in a conversion cost account and applies them to production upon completion based on standard costs. Raw materials are recorded in a Raw and In Process Inventory account instead of separate raw materials and work in process accounts. Conversion costs are then backflushed from the conversion cost account to cost of goods sold upon completion of production. The document provides examples of alternative journal entries that can be used under different production and sales scenarios within a backflush costing system.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    144 views2 pages

    AFAR Backflush Costing

    Uploaded by

    Jaybie John Palco Eralino
    Backflush costing is a streamlined cost accounting system used for Just-in-Time inventory systems. It accumulates conversion costs in a conversion cost account and applies them to production upon completion based on standard costs. Raw materials are recorded in a Raw and In Process Inventory account instead of separate raw materials and work in process accounts. Conversion costs are then backflushed from the conversion cost account to cost of goods sold upon completion of production. The document provides examples of alternative journal entries that can be used under different production and sales scenarios within a backflush costing system.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    BACKFLUSH COSTING (JIT COSTING)

    TERMS:
    Backflush Costing System – streamlined costing accounting system for Just-in Time inventory system.
    Cost Accumulation and Allocation:
    1) Raw and In Process Inventory account is used to record raw material purchases and materials input to
    production instead of raw materials inventory account and work in process inventory account,
    respectively.
    2) Conversion cost account is used to record both labor cost and overhead costs and applied to production
    upon completion of production.
    3) Normally, conversion cost is backflush to COGS upon completion.
    4) Standard cost is, normally, used in applying the cost to production.

    JOURNAL ENTRIES:

    RIP Inventory xx
    Appropriate Account xx
    #purchase of and use of materials for production

    Conversion cost xx
    Appropriate Account xx
    #accumulation of conversion cost

    COGS xx
    Conversion cost xx
    #applied to production based on standard cost

    Finished goods xx
    RIP Inventory xx
    #back-flushing to FG upon completion

    RIP Inventory xx
    Finished goods xx
    COGS xx
    #recording of ending balance conversion costs for uncomplete and unsold units

    ALTERNATIVE JOURNAL ENTRIES:

    1) If the production time were extremely short:

    Conversion cost xx
    Appropriate Account xx
    #accumulation of conversion cost

    RIP Inventory xx
    Finished goods xx
    Appropriate account xx
    Conversion cost xx
    #record upon completion - combine entries for a) purchase of and use of materials for productions, b)
    allocation of conversion cost and c) black-flushing to FG
    2) If goods shipped immediate upon completion:

    RIP Inventory xx
    Appropriate Account xx
    #purchase of and use of materials for production

    Conversion cost xx
    Appropriate Account xx
    #accumulation of conversion cost

    COGS xx
    Finished goods xx
    RIP Inventory xx
    Conversion cost xx
    #upon completion and sold – combine entries for a) allocation of conversion cost, b) back-flushing to FG
    and c) cost element of sales transaction

    3) If production reflects ultimate JIT system:

    COGS xx
    Finished goods xx
    RIP Inventory xx
    Appropriate Account xx
    Conversion cost xx
    #combine entries for all basic backflush costing journal entries

    4) If all cost were being backflush to COGS, not on RIP Inventory:

    Conversion cost xx
    Appropriate Account xx
    #accumulation of conversion cost

    COGS xx
    Conversion cost xx
    Appropriate Account xx
    #combine entries for a) allocation of conversion cost and b) back-flushing to COGS

    RIP Inventory xx
    Finished goods xx
    COGS xx
    #recording of ending balance conversion costs for uncomplete and unsold units

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