 In this presentation we will record a journal entry related to the requisition of materials in a job cost system. We're gonna have the information on the left. We're gonna enter the journal entry into our general journal. First a word from our sponsor. Well actually these are just items that we picked from the YouTube shopping affiliate program but that's actually good for you because these aren't things that we're just given to us from some large corporation which we don't even use in exchange for us selling them to you. These are things that we actually researched, purchased and used ourselves. Acer 27 inch monitor. I've been using an Acer monitor as my primary monitor for a few years now. This is the first Acer monitor that I have used after having used a series of different brands of monitors in the past. The Acer monitor has been performing well and I'm trusting the Acer brand more and more as I use the monitor. I have a 27 inch monitor which I think is ideal for what I do which is of course the screen recording and the editing. If you would like a commercial free experience consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com where we have many different courses. You can purchase one at a time or have a subscription model given you access to all the courses. Courses which are well organized have other resources like excel files and pdf files to download and no commercials. Here then posted to the general ledger and the general ledger will be used to create the trial balance. We can see the trial balance is going to be in order in terms of assets, liabilities, equity, income and then expense accounts. In the trial balance we're going to have the debits represented with non-bracketed or positive numbers, credits with bracketed numbers or negative numbers for excel and therefore the total debits and credits are equal to zero at this time, no net income at this time, nothing in sales cost gets sold or any of the income statement accounts. Our focus here of course is going to be on the tracking of inventory through the job cost system so we're going to be working up here in the work and process and the raw materials finished goods overhead as we work through this problem. Our goal here is going to be taking raw materials, the raw materials that are going to be in our warehouse represented by the raw materials account and we're going to be transferring them to the jobs and to where we can. We'll transfer them to the job and anything that we cannot transfer to the job we're going to put into overhead so when we transfer things to the job that means that it's going from the warehouse we want to take this stuff from the warehouse and we want to put it into the factory where we produce things so if we're making guitars we would take the wood or whatever from the warehouse and put it into the factory where we're going to start to make the inventory so that's going to be our idea here now if we cannot apply it to a particular job within a job cost system then we're going to apply it out to overhead so first let's just take a quick look at an example of a form that might be used to do this and remember if it's a large company we're going to have to do this with documentation to have a requisition form in order to transfer the inventory so the inventory we imagine is in the warehouse we might have something like a requisition form something like this this is just an example of a requisition form which would have the job number the materials the date of the requisition and what we want if it's planks wood requested by and it's going to be filled out by so we have this check in balance here so in a larger company we would have this requisition and this would be what the documentation would be to allow us to take the the raw materials from from from the warehouse and put them into a job and notice we're referencing here a particular job and that's going to be allowing us to assign it both in terms of the materials ledger card which is kind of like the material tracking the material within an inventory type system in the warehouse it's also going to be used as requisition form to for us to apply it to the job and we'll see that process here so we need to know which job it is so that we know what job it's going from out of the warehouse and what job it's going to into work and process and then we might have a materials ledger card this is just showing the inventory just again just an example form that would say that we're tracking basically the inventory in a similar way in raw materials as we would just in a merchandising company so for example we have anything that's going to be received here would have a receiving report number of units received units total price and then we're going to add that to the total here so that this is what's on our balance sheet at any given time at any given date so so on the balance we started with one unit at 225 or 225 then we got three more units i'm sorry we got two more units to add up to that three at 225 or 675 dollars worth of inventory and then when the inventory is taken out we do that with a requisition form similar to this getting these are just examples and the requisition form says we're going to want one unit at 225 and that leaves us with three minus the one or two units that are still left at 225 for 450 so these are just an example of us having to track the inventory within the warehouse and it's similar to us tracking inventory if we were a merchandising company and tracking inventory if the price is changed we have the same flow assumptions that problems that we'll have to deal with first in first out last in first out average cost our focus here though is going to be on the job cost so these are just going to be some examples of the types of forms we would need and now we're just going to basically say i'm going to scroll all the way to the left that the requisition forms that we got are these these requisitions forms for these jobs job b15 b16 b17 b18 and b19 we're going to start these jobs and we asked for materials for them with requisition forms and so then we also have some materials that are are small materials that we're not going to apply to a particular job of 550 and so that could be stuff like if we're making guitars or something i it's like glue or something like that the things that go into the guitar if we're talking about construction these might be small small materials and whatnot that it's not worth us tracking to particular jobs okay so that means that what we're going to do is take from a journal entry standpoint the journal entries the easiest part of this we're just going to take the information out of the raw materials and transfer it to work in process both of these being inventory accounts raw materials is an inventory account with a debit balance we're going to make it go down doing the opposite thing to it which will be a credit so i'm going to right click on uh raw materials right click and copy i'm going to put that on the bottom so it's on b5 right click and i'm going to paste it one two three just the values and we're going to credit it for this amount the two uh two thousand two hundred and thirty not including the 550 so it's going to be a credit of 2230 and then we're going to debit something for that same amount i'm going to do that by saying negative of this number or we could just type in there 2230 and it's going to go into the work in process account so here's the work in process account that's where it's going it's a debit it's a it's another asset account it's going to increase so we're going to do the same thing to it as its normal balance a debit so i'll right click on that and copy it put that in b4 right click and paste one two three so there's going to be our first journal entry let's go ahead and record that to the general ledger so we're going to go to the general ledger for work in process it's going to be one two three four accounts over so it's going to be four accounts to the right as well so if i go to the right here's work in process i'm going to just go back and forth from the screens a little bit we could freeze the pains or you could make the screen smaller like this so you can see more but i'm just going to try to scroll back and forth here so we're recording this right there in s uh nine it's going to say equals and point to that 2230 i'm going to scroll to the right a little before it's going to go from zero up by 2230 to 2230 this amount then is it's what's being used to create the trial balance and we're of course out of balance by that amount now now we'll record the other side and these you may not be able to use these if if it's locked but they're in uh they're in the formulas section here i've put them in the quick toolbar okay then raw materials raw materials is here here's raw materials third account it's the same order on the general ledger so raw materials is going to be down here so we want to be on the credit side so i mean so p 24 p 24 and i'm going to have to scroll up just a little bit to do this so i'm going to be in p 24 here and say equals and i would highly you could put it just a dollar amount here but i would use formulas as much as possible scroll up and we want that 2230 on the credit and enter and that brings the 550 down by 2230 to 147 770 that then can be found on the trial balance and it's going to put it back in balance here debits equal in the credits no effect on net income no effect on net income now i'm also going to represent this on the jobs as well and we're just going to have a quick little job sheet so that we can track these jobs so 1516 1718 and 19700 450 uh uh 670 180 and 230 i'm going to copy these i'm going to go all the way to the right and here's going to be our jobs so i'll put this down here again just so we could see it so job here's going to be our job sheets now these are just fairly simplified sheets but notice what we're going to have is the job number and i'm going to represent whether it be opened closed or shipped meaning we sold it and then we've got the direct materials direct labor and the factory overhead every job is going to include those three things when we start the job we generally start with the materials that's the first thing we do so now it's in progress and we're transferring these materials and we know which job they should go to because they're right here so we're going to say okay materials for jobs uh b15 is going to be that 700 so 700 we're going to say for b16 is 450 450 uh b16 is going to be here and that was 670 uh we're going to say that this is b18 and that's going to be 180 and then b19 is going to be that 230 so here's b19 230 now if we did this correctly if we add up these jobs which is this cell adding them up there's the total for all the jobs which only includes you know the direct materials at this point that should be equivalent to what's on the gl at this time so here's the gl or here's the trial balance which is equivalent to the gl and that's going to be the same as what's on the job sheet so notice that this number is being derived from this number and this number is is going to be supported if we look at if we look at this number on the trial balance we need to support it uh with with a subsidiary ledger in a similar way that we need to to uh support the accounts receivable with a subsidiary ledger in other words accounts receivable uh we need to support it not only with the gl given its detailed by date but by who owes us money we need a subsidiary ledger telling us by customer the same thing is true here we need the gl tells us by date what happened but we also need it by job because we need to track this information by job that's what these job cost sheets are doing so we're going to track over here each thing by job the job cost sheet has to match uh all the job cost sheets if we add them together has to match what is in the working process okay i'm going to scroll back to the left now and i'm going to do the last piece of this which is this uh indirect materials that's also going to come out of the materials warehouse but we couldn't assign it to a job we could think of it like a bind the glue for all the guitars we're making they just needed more of it in the warehouse we don't know which job it's going to go to we're just going to put it in there and whoever needs it uh can use it so then we've got the working process i'm sorry the raw materials is going to go down so i'm going to right click and copy i'm going to skip a line and skip another line to have a new journal entry i'm in b eight right click and paste 123 so the raw materials is going down again by this 550 but and then there's going to be a debit so i'm going to do that with a negative of this number or we could just type in 550 and now we just need to know what that account is going to be it's not going to be working process because we can't apply it to a job so we have to put it in this bucket of overhead we will apply it to a job at a later time but we'll have to do some type of estimate in order to do so so i'm going to right click and copy the factory overhead put that in b seven right click and paste 123 and now we'll record this out so here's the factory overhead here's the factory overhead it's like one two three four five six over so it's going to be the same order on the on the gl and the factory overhead is going to be down here actually it's in uh s 25 factory overhead debit side so i'm going to put my cursor in s 25 and say equals and then go left and i'm just going to scroll up till i find this and so there it is i'm in c seven and enter so it went from zero up by five five hundred fifty to five hundred and fifty and again if you double click on it it's c seven this number then is being used to create the trial balance here and we're out of balance of course by the 550 till we record the other side so then we're going to go to raw materials here's raw materials it's the third account it's going to be the same in the gl so here's raw materials uh down here it's a credit again so we're in p 25 p 25 we'll say equals i'm going to scroll up just a bit and pick up that 550 and it's going to bring this 147 770 down by 552 147 220 that number then of course used to create the trial balance here and that puts us back in balance debits equal in the credits and we have net income nothing right now and notice that's going to be the case for pretty much this whole like job cost system until we sell the the finished goods and then it'll be affected by cost of goods sold so all this activity we're doing here is really just going to be moving throughout the assets more specifically moving throughout inventory asset type accounts