Question

Are the journal entries that match cost flows to product flows in process costing primarily the same or much different than those in job order costing? Explain.

Short answer

Thejournal entries that are made to match the cost flow to the product flow are similar for process costing and job order costing.

Step-by-step solution

Definition of Process Costing

The cost method used by the business entity that produces a higher number of products with similar specifications is known as process costing. Under this method, the total cost incurred by the business entity is allocated to each unit by dividing the total cost by the total units produced.

Difference between the journal entries made under process and job order costing

The difference between process costing and job order costing in respect of the journal entries made for matching the cost flow to product flow is that process costing uses more work-in-process inventory accounts than they used in job order costing.

Similarities between the journal entries made under process and job order costing

The journal entries made for matching the cost flow to product flow are similar for both processes costing and job order costing. Under both of these methods, the material flows to the production process or jobs, and the direct labor is charged to the product.