 Hello, in this lecture, we're going to work a fairly comprehensive problem using the process cost system process cost being something that we're going to use for production. So whenever we're using job costs or process costs, we are producing something that difference between job costs and process costs being that job cost usually has a differentiation of things we produce process costs being very similar types of things. So it's things like processing oil or something like that. So we then have to allocate to the process rather than individual jobs. So that's what we're going to have here. We're going to have the data support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. On the left hand side, we're going to enter that into the blue areas and then we're going to have our trial balance which will populate automatically. We will post the journal entries here to the general ledger on this side. Once we post to the general ledger, it will automatically populate our trial balance here. This will obviously be making more sense as we go. We can see the trial balance formatted in terms of assets and green liabilities and orange or yellow and equity in the lighter blue and then the income statements sales and expenses in the darker blue. We have net income just the bottom half here. We just got the gain or loss at this time and we can see that the debits equal the credits because the debits minus the credits equals zero. We're going to put it in this format over here having debits with positive numbers, credits with negative numbers. That allows us to save some room in posting this information here. We of course will break out the debits and credits in terms of a debit column and a credit column on this side as well as represent the credits with negatives and that's how we know we're in balance on the trial balance meaning that the debits minus the credits equals zero. We could see that on the general ledger too so if we added up all the GL accounts in this way we can use formulas to see that the debits equal the credits on the balance of all these accounts which is of course what is making up the trial balance. Alright so let's work through this problem. We're going to start off they're going to give us the inventory at the end so we're going to need that later we don't need that quite yet. We could see that we're going to be focusing in of course on the inventory accounts to do process costing as we produce our inventory. So those accounts include the main ones we'd be focusing on are raw materials inventory, working process inventory, finished goods inventory and overhead. I'm putting in the inventory section here and then once we sell it that inventory will finally go to the cost of goods sold when we sell the inventory and that's the expense related to us using the inventory in order to generate revenue by giving it to a customer. So what we have here then we have the raw materials purchased on credit so that's the first thing that we are going to take a look at if we purchase something on credit the idea then I would always ask is cash affected in this case no we purchased it on credit so instead of paying cash we paid with a payable so what's going to go into accounts payable now it might be easier to think about what we're getting we're going to get raw materials raw materials is up here it's an asset has a debit balance we're going to make it go up so we're going to do the same thing to it which in this case is another debit so I'm going to copy the raw materials I'm going to put that on top in the debit area the amounts being 300,000 we're going to credit something 300,000 so I'm going to put a negative of that number there's that number or you could just put a negative 300,000 for this worksheet's purposes we're going to put all credits as negative numbers to help us with some formulas for excel all right so we have the negative 300,000 and that's going to go into the payable it's not going to be cash going down it's not the good thing going down it's the bad thing going up payable is going up it has a credit balance we're going to make it go up again with doing the same thing to it which is another credit by copying that account putting it over here I'm going to paste it right click paste it one two three again I don't want to write over the formulas you could but I'd rather paste it one two three keep the blue cell now we're going to post this to the general ledger this is called posting to the general ledger as we've done many times in the past so the general ledger will be in order the same as the trial balance so we've got the assets and the liabilities and the equity and then the income statement so we're looking for raw materials it's the third account on the g on the trial balance therefore it'll be the third account on the general ledger so here's the geocache count sable raw materials I'm going to put my cursor in o 23 this is o 23 and just say equals and then I could use the arrows and just go over here until we go up to what we want to post which is this item here and enter so there is that item the next one is a count payable that's going to be the first orange account down here so it's in the same order on this side so the first orange account is right there so it's going to be a credit so I'm all the way over here in cell x 22 x 22 right there I'm going to say equals and then scroll over till you can see it and then go into the 300 000 credits and enter now if you want to see him at the same time we could also of course change the screen and make the screen a bit smaller like this so we can see the 300 the 300 there and what that does to our balance is of course put as a back in balance by having the debits equal the credits here as well as the debits equal the credits here and we can see that our raw materials inventory is 368 in our running balance and 368 has then populated here this number coming from there so that's going to be the first general entry we have next one we have the factory depreciation and I did switch this up a bit I moved this one down here and put the factory depreciation next so that's the next one we will take a look at so we have depreciation on the factory anytime something sets we are going to be working in the factory that's an indication that it's going to be part of inventory if it was depreciation on the office building where we do the administrative work that wouldn't be going to the asset of inventory if it's on the factory where we make inventory then it's going to go into the inventory so that means that instead of debuting like we have learned in the past the depreciation expense which we've probably just memorized that journal entry we need to now unmemorize it because really the reason it's going to go into the expense is because we used it in order to generate revenue which is the matching principle in that time period but this time we're using it to generate revenue later it hasn't helped us generate a revenue yet it's helping us generate the asset that asset being inventory later we will expense it in the form of cost of goods sold so we're going to put it into the asset in this case and we don't know where to put it yet we don't know what process really to put it into so we're going to dump it into our bucket the bucket assets for inventory being factory overhead so I'm going to copy factory overhead we're going to put that on top paste it one two three right there that's going to be the 50,000 so then we're going to credit something for that same 50,000 I'm going to do it by saying negative of this number and the credit's going to be exactly what we thought it would be so that's just that's the normal outfit so instead of debit debiting depreciation expense we debit factory overhead and we credit accumulated depreciation so accumulated depreciation is going to be the allocation of the cost so it costs 250,000 less the accumulated depreciation 200,000 is the book value at this time we're going to credit this accumulated depreciation so I'm going to copy that I'm going to put that in cell B13 that's going to be the bottom amount there and now we can post this out we're going to post this out so I'm going to scroll over here now we can see that the factory overhead is like the one two three four five six the count down here it's going to be the same when we go to the general ledger over here so we got the factory overhead is way down here we are on the debit side so I'm in cell S27 so S27 and I can just barely see my journal entry up here so S27 equals this cell in C12 and enter the other side's going to go to the accumulated depreciation and that's going to be the like the last green acid count on the trial balance which of course means it's going to be the last account over here in the general ledger so I'm in x16 if you want to see it all together you can hold down control and scroll down and that'll make it a little bit smaller so you can kind of see the whole screen if that's useful for an x16 way over here I'm going to say equals and I'm going to point to the credit and when I hit enter it's going to make that 50 go up to 100 like so that 100 also represented here going to hold down control scroll back up back to 100 over there and now we've got this 100 represented here and we've got the factory overhead went up by and to that 50 000 all right let's see look took a look at the next item the next item is going to be factory utilities on account so this is going to be the same type of principle and remember again we probably learned factory utilities as we're going to debit utilities expense anytime we see utilities we probably think utilities expense debit but in this case that's the general rule but that's because we usually use utility expense in order to help us generate revenue matching principal in this case we're using utilities in the factory to help us generate asset up here inventory therefore and we don't know where exactly the process to put it to so we're going to do the same thing we're going to put a debit to instead of the expense of utilities we're going to put it into the asset of inventory more specifically factory overhead and I'm and again I'm putting the factory overhead up in the asset account because it's going to be an asset event once we allocated it out so I'm going to copy that I'm going to put that on top hasted one two three that's going to be for the 28 000 in this case we're going to credit something for 28 000 as well that credit is going to go to now usually when we pay the utility pill we pay with cash but we're going to put it into the payable in this case because it said on account so we're not going to hit cash we're going to put it into the payable on accounts I'm going to copy accounts payable and that's going to be the credit pacing it one two three posting this out if we scroll down one two three four five six is the sixth account down factory overhead so we're going to scroll over here find factory overhead which is right there it's an s28 so here's s28 we're going to say that that equals this 28 000 it's going to go up in that direction and then we got the accounts payable first orange account over here so if I'm looking for accounts payable there it is once again I'm going to hit scroll I'm in x23 scroll and down or control and scroll down and that will make the screen smaller so we can see that at the same time so I'm in x23 equals we're going to point to that 28 000 making the payable go up because we owe more money I'm going to scroll back over here to the trial balance and within the trial balance let's go back down to 100 we can see our items within the trial balance here next item says we got the direct materials used to 14 500 so this is what we're going to use in the production of of course our inventory that's what we're using it in order to do so what's happened is we got the raw materials here we've got the raw materials and now we're putting them to use so you can visualize the raw materials like a pile of wood in the corner we're putting that to use in the production process being the work in process at this time so we're going to take it out of raw materials and we're just going to move it down here so it's going to go into work in process the the inventory in process that has a debit we're going to make it do the same thing by making it go up with another debit so I'm going to copy the work in process paste it 123 it's going to go up by the 245 and then we're going to credit something I'm going to put negative of the 245 and we're going to credit the raw material raw material being an asset it's going down out of raw materials into the work in process copying this account putting it underneath right clicking pasting one two and three