Question

In final process, the output is called:

• A. WIP
• B. Finished goods
• C. Normal loss
• D. Abnormal loss

Hint:

The journal entry to close the final process is: $$\text{Finished Stock Account Dr.}$$ $$\quad \text{To Final Process Account Cr.}$$

Answer 1

The Correct Option is B

Step 1: Analyzing the Flow of Process Costing:
In process manufacturing, raw materials move sequentially through various processing stages. The output of early processes is treated as semi-finished goods or raw material inputs for subsequent stages: $$\text{Raw Materials} \to \text{Process 1} \to \text{WIP} \to \text{Process 2} \to \dots \to \text{Final Process}$$

Step 2: Defining the Final Stage Transfer:
Once the materials complete the final process, no further manufacturing steps are required. The product is complete, meets quality standards, and is ready for sale to customers. At this point, the cost of the completed output is transferred out of the Final Process Account and into the Finished Stock Account.

Step 3: Selecting the Correct Option:
The completed output of the final stage is classified as Finished goods. This corresponds directly to option (B).