Job cost system cost flows will provide an overview of cost flows in a job cost system. The job cost system is one of two cost tracking systems typically used when producing inventory, the other being a process cost system. Both systems will need to track the costs from raw material to converting those raw materials to finished goods. The job cost system will support this process by allocating costs to jobs and tracking the costs of each job using a job cost system. When producing inventory we will start by purchasing materials. We will then transfer the materials to either work in process or to orverhead depending on whether we can apply the cost to a job. We will then apply direct labor to the work in process account and use an estimate to apply overhead. Once the inventory is completed we will move it from the work in process account to finished goods, the finished goods account also being supported by job sheets. Finally, we will sell the finished goods inventory and move the cost from finished goods to cost of goods sold.
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