Page 346 - Accounting Information Systems

C H A P TER 7 The Conversion Cycle 317

Cost Accounting Activities
Cost accounting activities of the conversion cycle record the financial effects of the physical events that
are occurring in the production process. Figure 7-13 represents typical cost accounting information tasks
and data flows. The cost accounting process for a given production run begins when the production plan-
ning and control department sends a copy of the original work order to the cost accounting department.
This marks the beginning of the production event by causing a new record to be added to the WIP file,
which is the subsidiary ledger for the WIP control account in the general ledger.
As materials and labor are added throughout the production process, documents reflecting these events
flow to the cost accounting department. Inventory control sends copies of materials requisitions, excess
materials requisitions, and materials returns. The various work centers send job tickets and completed
move tickets. These documents, along with standards provided by the standard cost file, enable cost
accounting to update the affected WIP accounts with the standard charges for direct labor, material, and
manufacturing overhead (MOH). Deviations from standard usage are recorded to produce material usage,
direct labor, and manufacturing overhead variances.
The receipt of the last move ticket for a particular batch signals the completion of the production pro-
cess and the transfer of products from WIP to the FG inventory. At this point cost accounting closes the
WIP account. Periodically, summary information regarding charges (debits) to WIP, reductions (credits)
to WIP, and variances are recorded on journal vouchers and sent to the GL department for posting to the
control accounts.

FI G U R E
7-13 COST ACCOUNTING PROCEDURES

Cost Accounting General Ledger

Initiate
Work WIP Work Journal
Production Order Record Order Update
Planning Voucher GL

Move Tickets
WIP
Update File
Job WIP and Journal
Work Tickets Calculate Voucher
Centers Variances
General
Ledger
Standard
Cost File
Inventory
Mat'l Control
Inventory Requisitions Move
Control Excess Tickets
Mat'l Job Tickets
Journal
Journal
Mat'l Voucher
Voucher
Returns Mat'l
Requisitions Journal
Journal
Voucher
Excess Voucher
Labor Mat'l
Management Variances
Reporting System Mat'l Mat'l
Variances Returns
MOH
Variances File
Journal
Voucher File