Q19RQ - Horngren'S Financial And Managerial Accounting

Question

Briefly describe how journal entries differ in a standard cost system.

Step-by-Step Solution

Answer

The difference in journal entries are in raw material, WIP inventory, finished goods inventory and variances

Step 1 Definition of the journal entry

The journal entry is defined as the tool which is used to record the transactions of the activities in a chronological manner.

 

Step 2 Journal entries in a standard cost system are different

Journal entries are different in the standard cost system in the following ways:

Raw materials inventory: The actual quantity in the standard cost

Work-in-progress, finished goods inventory, and the cost of goods sold: The standard quantity of inputs allowed for actual outputs at the standard cost of inputs

Favorable variances are credited as they increase the operating income and unfavorable variances are debited.