Resource & Overhead Absorption Accounts in WIP
Hi,
What is the best practice in case of Resource & Overhead absorption accounts in WIP (Work In Process)?
I am thinking of mapping this in either of the following ways, Please suggest;
Recommendation 1:
Resource Absorption Account = Salary & Wages Account (So that whenever Resource will be charged to Job Salary & Wages account will be credited with that amount)
Overhead Absorption Account = Labor Welfare Account (In case of Labor Welfare Overhead)
Overhead Absorption Account = Rent Account (In case of Plant Rent Overhead)
Recommendation 2:
Resource Absorption Account = Resource Absorption Account- Machine & Resource Absorption Account-Labor (But in this case There will be CREDIT Balance left in Resource Absorption Account & it will not be knocked off)
What is the best practice in case of Resource & Overhead absorption accounts in WIP (Work In Process)?
I am thinking of mapping this in either of the following ways, Please suggest;
Recommendation 1:
Resource Absorption Account = Salary & Wages Account (So that whenever Resource will be charged to Job Salary & Wages account will be credited with that amount)
Overhead Absorption Account = Labor Welfare Account (In case of Labor Welfare Overhead)
Overhead Absorption Account = Rent Account (In case of Plant Rent Overhead)
Recommendation 2:
Resource Absorption Account = Resource Absorption Account- Machine & Resource Absorption Account-Labor (But in this case There will be CREDIT Balance left in Resource Absorption Account & it will not be knocked off)
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