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  • CA4 Just in Time and Backlush Accounting

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    The document discusses Just-in-Time (JIT) systems and backflush costing. JIT systems aim to minimize inventory levels by acquiring components and producing goods only as needed. Backflush costing omits traditional journal entries and combines material and work-in-process accounts. Manufacturing costs are charged directly to cost of goods sold. At period-end, uncompleted costs are backflushed to inventory accounts. The document provides an example transaction with the journal entries under backflush costing.

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    The document discusses Just-in-Time (JIT) systems and backflush costing. JIT systems aim to minimize inventory levels by acquiring components and producing goods only as needed. Backflush costing omits traditional journal entries and combines material and work-in-process accounts. Manufacturing costs are charged directly to cost of goods sold. At period-end, uncompleted costs are backflushed to inventory accounts. The document provides an example transaction with the journal entries under backflush costing.

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    132 views9 pages

    CA4 Just in Time and Backlush Accounting

    Uploaded by

    hellokittysaranghae
    The document discusses Just-in-Time (JIT) systems and backflush costing. JIT systems aim to minimize inventory levels by acquiring components and producing goods only as needed. Backflush costing omits traditional journal entries and combines material and work-in-process accounts. Manufacturing costs are charged directly to cost of goods sold. At period-end, uncompleted costs are backflushed to inventory accounts. The document provides an example transaction with the journal entries under backflush costing.

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    of 9

    COST ACCOUNTING AND

    CONTROL
    JUST IN TIME SYSTEM AND BACKFLUSH ACCOUNTING

    Alexsander C. Ong, CPA


    Faculty, Polytechnic University of the Philippines – Sta. Rosa Campus
    COST AND ACCOUNTING AND CONTROL
    JUST IN TIME AND BACKFLUSH COSTING

    LEARNING OBJECTIVES
    After studying this chapter, you should be able to
    • Understand the Just in Time Philosophy
    • Differentiate the traditional costing with the backflush costing used in
    JIT system
    • Learn how to journalize transactions under backflush costing
    COST AND ACCOUNTING AND CONTROL
    JUST IN TIME AND BACKFLUSH COSTING

    JUST IN TIME (JIT) SYSTEM


    ❖ Attempts to acquire components and produce inventory units
    only as they needed, minimize product defects, and reduce
    cycle/setup time for acquisition and production
    ❖ JIT system maintains relatively small inventory levels because
    inputs are assumed to arrive just in time when production needs
    them
    ❖ The primary goals of JIT system:
    ✔ eliminating any production process or operation that does not add
    value to the product/service
    ✔ continuously improving production/ performance efficiency
    ✔ reducing the total cost of production/performance while increasing
    quality
    COST AND ACCOUNTING AND CONTROL
    JUST IN TIME AND BACKFLUSH COSTING

    BACKFLUSH ACCOUNTING
    ❖ Backflush Accounting omits some of the traditional journal entries
    relating to the stages from purchasing materials to the sale of goods.
    ❖ Instead of using separate accounts for Materials and Work In Process
    they are both combined into a single account called Raw and In Process
    Inventory. Purchases of materials are debited to this account.
    ❖ Since JIT systems assumes minimal level of inventories, Conversion
    Costs incurred are then directly charged to Cost of Goods Sold.
    ❖ At the end of the accounting period, manufacturing costs associated
    with any uncompleted or unsold items are “backflushed” and included
    in the Raw and In Process or Finished Goods Inventory.
    COST AND ACCOUNTING AND CONTROL
    JUST IN TIME AND BACKFLUSH COSTING

    ILLUSTRATION 1
    Selected transactions and other information
    for Blueland Company for January 2020 are as
    follows:
    Transactions for the period:
    a. Direct materials purchased on account,
    2,030,000
    b. Factory supplies used, 75,000
    c. Accrual of Factory payroll for the period,
    225,000 of which 125,000 is direct labor
    d. Other factory overhead costs: 1,450,000
    Depreciation, 45,000 Insurance expired,
    20,000 Maintenance paid, 85,000 Utilities
    paid
    REQUIRED: Provide journal entries using
    backflush accounting
    COST AND ACCOUNTING AND CONTROL
    JUST IN TIME AND BACKFLUSH COSTING

    ILLUSTRATION 1
    COST AND ACCOUNTING AND CONTROL
    JUST IN TIME AND BACKFLUSH COSTING

    ILLUSTRATION 1
    COST AND ACCOUNTING AND CONTROL
    JUST IN TIME AND BACKFLUSH COSTING

    ILLUSTRATION 1
    COST AND ACCOUNTING AND CONTROL
    JUST IN TIME AND BACKFLUSH COSTING

    REFERENCES
    • De Leon Jr., Guillermo M. & De Leon, Norma D. Cost Accounting (2012
    Edition). GIC Enterprises & Co., Inc.
    • Rante, Gloria A. Cost Accounting (2013 Edition). Millenium Books, Inc.

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