 Hello in this presentation we're going to work a problem related to a job cost system. So remember in a job cost system we will be working with the production of inventory and it's usually going to be production of inventory that is not the same in nature. So when we produce things we often use a process cost system or a job cost system we would generally use a job cost system when the things that we produce are not the same in nature. And also unlike a merchandising company where we're just going to buy stuff and then we sell stuff in the manufacturing company what's happening is that we are creating the stuff. So we're actually making the stuff the inventory being the stuff. So we're making we're buying the raw material we're processing that raw material then we have the finished good then we sell the finished good. So we need to track that process as we go. We're assuming that these finished these items are not the same in nature. Sometimes we can think about like a construction company doing jobs if we're attiling kitchens and whatnot we might tile one kitchen that's a lot larger than the other kitchen and therefore we have this problem of how do we allocate things to the jobs such as overhead when the jobs are different sizes. So those are the types of things we're going to talk about and we are going to use this information we're going to post journal entries into the blue area here we're going to then we're going to record the journal trees in the blue area then we'll post the journal entries to the general ledger over here. So here's the general ledger it has every account that we will be using starting with cash assets and green and then the liabilities and the equity accounts and over here and the income and the expenses we will then once we post things everything to the general ledger then it will automatically populate the trial balance over here. So for example this number is coming from that number on the general ledger and that is the case all the way through here so we'll be able to see what is happening as we go through this problem and note that the new thing is that we are also going to have to track this number the working process not just by the general ledger which will be right here that ties out that's the same number the general ledger is by date but we also want to track it by job. So you can compare that similar to the accounts receivable account the accounts receivable account we have 180,000 in it if we look at the activity in the general ledger we can see the activity by date but in that account we also want to track it by who owes us money so we want to list that 180 by clients well the similar kind of notion is going to be by the working process working process represents what has what is going on or what is in process at this given point in time in terms of inventory where we have these inventory accounts raw materials that's what we paid for it so that it kind of is what it is the working process is what is we're working on and then we're going to transfer that to finished goods so we're going to have to back up this working process if we go over here that's all the way over here in our job cost system so our job cost system is backing that up by job so we have these three jobs they're not the same you can think of them as like a construction company where we're working on a job or or we are creating something creating making inventory we've got job 14 job 15 job 16 and if we add the totals up the 41 the 42 and the zero they add up to this 83 as we can see here and that ties out of course to the 83 that we just saw on the general ledger and the trial balance now when we think about us creating inventory we got to get in our heads that the inventory that we're making what we're creating it's consists of the raw materials whatever we're using to put into the inventory that's the most obvious piece of the ending product but remember that it also includes direct labor so obviously one for many types of things we make the largest piece of it is oftentimes the labor so how much how much does it cost for the labor that's basically a salary so notice now we're not going to expense the salary for direct labor when the employees are working we're going to put that into the cost of the inventory and expense it when we sell the inventory and then factory overhead is anything that we cannot apply to the job so the problem with factory overhead is that we do not know which job you apply it to because either it's too small for us to to take the time to apply it or it's something that's indirect such as the rent on the warehouse or something like that uh therefore we're going to have to find some way to apply it to the job and we'll talk about how we're going to handle that as we go so just keep in mind whenever we're making something if we're producing something whether it be job costs or process costs we're going to have three factors in production that are included in the inventory that's going to be direct materials direct labor and overhead and we're also going to have basically three inventory accounts to deal with that's going to be raw materials work in process finished goods and then we're obviously going to sell it from that point and then that's when we expense it in the form of cost of goods sold all right so let's first thing i'm going to do here is i'm going to hide a few of these cells because because i want to work with just part of the cells and have everything as close together as possible so i'm going to hide cells g2k so i'm going to put my cursor on g so you see the drop down left click highlight over to k which is that little skinny one let go and then it's right click on the selected area and hide that information all right so now we have what we're going to do here we're going to post it into this area and then we're going to have to record it over here on the general ledger all right so we're going to start off on one one where we purchase raw materials on account so i'm going to go through our series of questions as we go through this this is going to be a fairly basic start off there's nothing too unusual on this one we're going to say is cash affected no we didn't buy it with cash we bought it on accounts so we bought it basically with credit so that's going to be the payable account we may want to think about what we received however first in order to decide whether we should debit or credit the payable so what did we buy raw materials so if we look through here we can see raw materials is it is up here it's an asset it's kind of basically part of inventory so we're basically buying the raw materials that we are going to use to make our inventory it's an asset it has a debit balance we got more of it therefore we're going to make it go up by doing the same thing to it as what it is which is another debit so i'm going to debit this account i'm going to right click on it copy it i'm going to put it in c4 right click and paste one two three just the values we're going to debit the raw materials we're going to put the debits on top of course we're going to debit it for four hundred thousand if we debit something we're also going to have to credit something and that credit will of course be the accounts payable i'm going to represent credits with a negative 400 000 for this worksheet so it's in this case it's in a credit column however it's also represented with a negative number so keep that in mind that's going to go to the accounts payable