 In this discussion we will discuss the discussion question of discuss how materials flow through a job cost system. So if we see a discussion question or and actually a question like this, we can first think that we are considering of course a job cost system so we might want to start off with just 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. What is a job cost system and maybe that could pick up some points in an essay type question then get into the materials within a job cost system and talk about what's going to be the course of materials what are materials going to do through a job cost system. So a job cost system is going to be some type of manufacturing system typically a system used for manufacturing or for service companies but for which there's going to be some type of customization in the jobs that we have typically construction companies any type of customization in terms of producing custom jewelry production or any time of customization so that all the products all the service and products are not standardized and therefore we need to track the cost of them specifically to the job so we know exactly what's happening in terms of cost relative to each job so that's going to be the job cost system now the materials of course is going to be one of the major components of in products if we produce inventory within a job cost system it's not the only components only one of the major three categories we typically think of including materials direct materials direct labor and overhead so whenever we think of inventory we think of those three things but clearly materials going to be one of those core components so what's going to be the course of materials in a job cost system where we make stuff it's not that we buy stuff and sell stuff we buy stuff then make it in the other stuff and then sell it so we're going to buy materials make it into the inventory and then sell it and in essence that's what's going to happen to the materials but we probably want to get a little bit more detail than that so of course we're basically going to buy the materials we're going to make the materials into things and then sell it so to get a little bit more detailed we would say first we would purchase the materials possibly put it into our warehouse so if we're making like guitars we're going to purchase the wood for the guitars we're going to put that into our warehouse we're going to track the materials as we would in a similar way that we would have for inventory in a merchandising company we're going to track the purchase of that and we're going to track the use of it now of course we're not selling that that it's part of inventory but we're not selling the materials because it's just raw materials we need to convert it to inventory so instead of tracking the inventory when it's sold as we would with a merchandiser and tracking the inventory in that way using possibly a flow assumption like first and first out last and first out of course the raw materials will leave the warehouse but they're going to go into production so they're going to go into production once they do that and this could be done with forms so we might have a requisition form that would record the requisition of materials that would be needed in the factory from the warehouse and then the materials would of course move from the warehouse to the factory where we would start production once we do this once we start working on the materials we're going to move them on the ledger from raw materials to the work and process account and as we do that anything that's in the work and process accounts needs to be supported by kind of like a subsidiary ledger by the job cost sheets so we will also record on the job cost sheets where these materials are going to be which jobs they're going to be included in now if it's indirect materials we don't know which job to apply it to then we're going to move those on our our books not to a job cost sheet because we don't know where it goes but to factory overhead so then the next step of course is we're going to work on those materials we're going to add direct labor we're going to add overhead to it to finish the direct materials and once those direct materials are finished we will then move them journal entry we're going to move them out of out of the production process and we're in our factory to wherever we store the finished goods so that they're ready for sale possibly go into a store or or whatever our sales process will be and then they'll be in finished goods so the journal entry there is going to be taking it out of work in process and going into the finished goods now if you consider the job sheets then of course what we have to do is indicate the fact that these jobs are now complete and when we think about the job sheets that support the work in process they're no longer going to be including the ones that are now finished and have now you have been moved to finished goods the finished goods then number is going to be supported by the job cost sheets as well so we're going to have the job cost sheets for the finished goods that have been completed then of course the last step once they're in the finished goods is we'll have a sale so we're going to have a sale at some point and then just like in a merchandising company we're going to sell the inventory now when you think of the sale it's it's a little bit confusing because we've always been thinking about this whole process we've been thinking about the cost and not so much the sales price which is this thing that we usually focus on all the time the sales price so here we've been tracking the cost all the way through so when we sell something you might start thinking well where does sales fit in to this here and remember there's two things that happen on a perpetual system we have the sales entry and and the cost of goods sold entry you can think of them as one entry but it's easier to think of them as two entries that happen at the same time so we usually debit accounts receivable or cash credit sales that's going to be the one half that's not really directly applied to our inventory however the number isn't because we will have to figure that out we could base it on our costs that we have tracked but it's not necessarily derived directly from from exactly what we have from the cost the inventory then is what we've been tracking the other side of the journal entry which is to decrease inventory taking it out of finished goods inventory and then put it into or debit credit inventory debit cost of goods sold the expense related to us selling the inventory an income statement account it finally going to the temporary accounts to the income statement accounts us finally expensing at this point the costs related to the inventory which include the costs related to the materials at the beginning of the process so way back when when we bought the materials they're finally being expense not in the form of materials expense but in the form of cost of goods sold that cost of goods sold including not just the materials but everything that goes into production including materials and direct labor and overhead