 In this discussion, we will discuss the discussion question of discuss how to track and report the flow of labor in a process cost system. 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 then 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. So if you see a discussion question like this or an essay question like this we want to pick out the key topics here. We want to track and report the flow of labor. So we're looking at labor and we're looking at a process cost system. So when we consider a process cost system, we're typically thinking of a system for a manufacturing type company. Usually manufacturing companies that will be producing or making inventory usually use one of two systems or a hybrid of both the process cost system or a job cost system. We hear focusing in on the process cost system, process cost system, a way that we're going to be tracking the raw materials that will then go through to the finished goods that will then be sold in the process cost system for a manufacturing company. We're also going to be focusing in on the labor. So we're considering how do we track labor related to a process cost system. So when considering labor for the process cost system, we kind of have to start with the raw materials because that's the beginning point of the process cost system and think about the flow or visualizing the flow of the materials as they go from the beginning to the end process where they're in finished goods and then ultimately sold where we finally make income on it or report it as cost of goods sold. So the first thing we do of course when we make things is we're going to buy it. We're going to buy the materials. We buy the materials and then we process that material into the work in process typically. So now we have the work in process. We're starting to work on our stuff on our inventory and then we have to include on that the things that are going to be conversion type costs, which will include the labor. So labor is going to be a conversion. It's going to be us converting the raw materials to the finished goods. So we're going to be working on the raw materials in the conversion process. And as we do that, we'll track the amount of work that's being done by process. So we'll be in the process and we'll track the work by process. We'll process payroll. So you can think of the payroll being a similar process, but normal payroll you would think that we would debit payroll expense and credit the payroll payable or cash that would be simplified not talking about payroll taxes or anything here. But if we're talking if we're making inventory, then the work the direct labor when we process payroll isn't going to debit payroll expense, it's going to be put into the inventory, into the work in process. So that's going to be the key point here. So the inventory, the labor that's direct to a process, we're going to debit and increase the work in process to the applicable process that the people are working on. So that's going to be an increase to work in process, credit cash or with a debit and then we'll credit cash or wages payable. And then any indirect items that we don't know which process to put it in for labor, we can then debit the overhead account and then apply out the to the proper location for from overhead for indirect labor. And then of course, once we're once we've completed the process, it's going to go from to however many processes are there. If there's more than multiple work in processes accounts, it's going to go out of one work in process to the second work in process. And then finally, at some point, it'll go out of work in process altogether and go into finished goods at that point in time. We'll have three items involved that we think about in inventory, typically the materials, the labor that we've included, the conversion of the labor and then using the conversion cost of labor and then the factory overhead. And then we'll move that out to finished goods with a credit to work in process and a debit to finished goods. So now it's like inventory, it's ready to sell and it includes at that point, of course, the labor in the finished goods inventory. Then we finally sell it at some point and we take it out of the finished goods, crediting finished goods and debiting cost of goods sold as we make the sale. The other side, of course, being sales increasing, revenue increasing and the debit going to the accounts receivable or cash.