Question

In each process all direct costs and overheads are:

• A. debited always.
• B. credited always.
• C. either debited or credited.
• D. neither debited nor credited.

Hint:

To remember ledger entries: Debit represents what goes into the process (materials, labor, overheads), while Credit represents what comes out of it (completed output, scrap, losses).

Answer 1

The Correct Option is A

Step 1: Understanding the Structure of a Process Account:
A Process Account is a ledger account structured to accumulate all manufacturing costs incurred at a specific stage of production.

Step 2: Applying Double-Entry Bookkeeping Rules:
According to the rules of nominal accounts, all costs, expenses, and asset inflows are recorded on the Debit (left) side of the account. To track process costs, managers make the following entries on the debit side:
• Debit Side (Inflows and Expenses):
• Cost of raw materials introduced.
• Direct wages and operating labor.
• Direct expenses.
• Allocated manufacturing and factory overheads.
• Credit Side (Outflows and Recoveries):
• Scrap value realized from normal loss.
• Value of abnormal loss.
• Cost of completed output transferred to the next process or finished stock.

Step 3: Conclusion:
Because all direct inputs and overheads represent expenses and resource consumption, they must always be debited to the Process Account. This makes (A) the correct option.