 In this discussion we will discuss the discussion question of describe key documents used in a job cost system. If we see a discussion question like this or an essay question like this we can see from it that we're starting off with a job 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 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. So we might be able to pick up some points by just considering what a job cost system is even if we're not really clear on all the documentation for it. So that's where we would start. It's a job cost system is typically going to be one of the two types of cost tracking systems we will have when we're in a production company. So when we're producing things we could use a job cost system it typically being used when we're producing things that are somewhat customized somewhat different in nature we're not making all the same units of items. It could also be used in a service company when we have types of jobs that we work on that will be different we're not making inventory but a service company will typically be focusing in on the production process here. So we'll be thinking about us making things making things that are somewhat customized somewhat different in nature and using a job cost system to allocate the cost to the things we are making. So it's useful if we're thinking about forms then as to think about the process of how the process is going to work how are the raw materials going to be converted to the finished goods and then think about the forms that will be taking place along that process. So there's in essence there's going to be three types of costs that we need to think about and those are going to be including materials direct materials direct labor and overhead. So we can consider as those costs are applied to the inventory you know what types of documentation is going to be there for those costs. So first what we're basically going to start off with the materials when we get the materials we can imagine them getting coming into the warehouse and we're going to then fill out a receiving report saying that we have received the materials we're going to count the materials and make sure that everything is proper once we get the materials we're going to record them we could call that into like a material ledger card which is basically us tracking the inventory similar to how we would track inventory if we were just a merchandiser just getting the inventory counting it tracking it we're going to have to track it in a similar way as we would inventory for a merchandising company meaning we might use a cost flow assumption first in first out last in first out average we're going to have the same kind of kind of issues that we'll have to do when we count the inventory and then assign a cost to it. Now the only difference is of course the inventory is not going to be then sold directly to a customer it's just a component it's just raw materials so it will be transferred out of the warehouse but it won't be transferred to the customer it will be transferred from the warehouse to the factory where we start to work on it so if we make guitars we're going to transfer it then from the warehouse to the factory so when a new job happens that's when that happens and how what's the documentation that will drive that in a large company we can have a requisition form so the requisition form is saying hey we have this new job warehouse people we need you to give us some of the wood if we're talking about guitars we're going to say we need some of that wood that was purchased here's a requisition form for how many pieces of wood we need to transfer to the place where we produce to the assembly plant and so we're going to then transfer that wood with the requisition form to do that then the requisition form is going to be used to to record that the materials leaving on the material ledger card on the inventory side for raw materials and it's going to be going to that same form the requisition form is going to be used to put it to a job so we know the journal entry is going to go from materials to work in process and it's going to be supported by a job cost sheet so the job cost sheet is supporting the work in process account we can't put anything to work in process unless we know which job it's going to be on and so the job sheets are going to be used in order for us to apply that material to specific jobs that we are working on all those job costs sheets then supporting the work in process account once in work in process then we can imagine the other items that are going to be added here and that's going to be the direct labor and the overhead so direct labor is going to be something that we could people are going to work of course and when we record their labor we're going to record it not as an expense but to the inventory in order to track the time we're going to have to use some type of time sheet so we're going to have some type of time sheet that's going to be a possibly a clock in clock out type of time sheet which is going to have the job that people worked on it the number of hours and the amount that's going to be applied to each job and that's going to be the documentation we'll use in order to record again to work in process increasing the main account by the direct labor and if there's any indirect labor we'll also increase the overhead for the indirect labor using that same documentation we'll also use it to fill out any job accounts to support the work in process account so the work in process accounts going to have the total number will support it by naming which job will be used by having the time tickets that will allow us to have that detailed information then we're going to have the overhead and the overhead is going to include things like the materials the indirect materials not the direct materials but indirect materials which we could use the same type of requisition form but this time not being able to apply to the job and then being having to apply to overhead instead because we can't apply to the job same with the time indirect labor we cannot apply to the job will use the time tickets to apply it to overhead then anything else that's on the factory on production that we cannot apply to a specific job things like paying the utilities things like playing any other kind of what we already said the wages but anything else depreciation those types of things we're going to record to overhead they'll be driven by the same types of things that would be normally when we pay bills so if we had a bill for the utilities bill that would drive us but we wouldn't record utilities expense but instead put it into the overhead which will eventually go to the work in process account and then we'll use an allocation method to allocate from the overhead to the specific jobs will use a predetermined overhead rate in order to do that we can do that specific on the jobs in order to do that calculation and record the overhead per job based on some kind of cost driver in order to do that so that will happen on the job cost sheet then once the jobs are completed we will show on the jobs they have been closed or they're now completed and that will move them from the work in process account to the finished goods account and then finally of course we'll sell the inventory and that'll be driven by say an invoice which will record the journal entry for the sale typically and that'll be the same for like a merchandising company it recording the sales half debiting accounts receivable crediting sales and the inventory half crediting inventory reducing inventory and debiting the cost of goods sold writing off the expense at the end of the process finally recording the expense for all these costs we've been accumulating we've been capitalizing we've been putting on the balance sheet instead of the income statement in the form of inventory until this point in time when we actually sold it to help us generate revenue in accordance with the matching principle