Cost accounting

In chapter 19 of ‘Fundamental accounting principles’, John J. Wild addresses the issue on job order cost accounting. This is a process where an organization engages in activities to determine the cost that was incurred in manufacturing a product or delivering a service. It entails all activities that go on in an organization that will eventually result to a cost being incurred by the organization in the long run. One such cost is the one paid to pay employees for the hours they work in the organization. A clocking card is used as a way of keeping record of the amount of hours that an employee has worked in the organization and the total labor cost that is owed. The labor cost is paid in accordance to the working hours the employee clocked in and the job performed for a given period. The Job is defined as the part that the employee plays in the customization or development of a product or service on behalf of the organization (Chiapepetta, Shaw & Wild, 2011).

In some scenarios, an employee may be involved in the production of several units of a customized service or product and is thus said to be assigned a job lot. For this purpose, a job cost sheet is drawn to account for the separate jobs that were assigned to the employee for a specific period. All this information is essential and is fed to a cost accounting system which is responsible for the assigning activities depending on the organization’s inventory. Depending on the type of organization, a general accounting system is most applicable as it helps to plan activities involved in the manufacturing of products depending on the inventory in the organization (Chiapepetta, Shaw & Wild, 2011).

 

 

Reference

Wild, J. J., Shaw, K. W., & Chiappetta, B. (2011) Fundamental accounting principles, New         York: McGraw-Hill Irwin.