Question

What events cause debits to be recorded in the Factory Overhead account? What events cause credits to be recorded in the Factory Overhead account?

Short answer

Factory overheads are debited or credited based on anticipated overheads.

Step-by-step solution

Meaning of Factory Overhead

Factory overhead is the cost of running a company that cannot be directly related to a particular product or service. In most cases, overhead is associated with factories or production.

Explaining the events that cause debits and credit to be recorded in the Factory Overhead account  

The event that causes debits to be recorded in the factory overhead accounts:

Depreciation, insurance, and amortization are the events that cause credits to be deducted from factory overhead accounts.

The events that cause credits to be recorded in the factory overhead account:

When the company's estimated or applied overhead is less than the overhead incurred, it is credited to the factory overhead account. The cost of goods sold is then debited in these cases and credited in others.