In my managerial accounting, I am working on an assignment, and in the assignmen

Question

In my managerial accounting, I am working on an assignment, and in the assignment I have to do a journal entry for indirect materials. The text says to enter indirect materials as a debit to manufacturing overhead, and a credit to raw materials. However, in the assignment, the raw materials account only includes direct materials. Therefore, I am wondering what to do with the credit side of my entry, considering I can't have it come out of raw materials, as the text says, because in the problem, only direct materials are in that account. I have assumed that the credit in the case would be to AP, but I am not sure and I would like to hear someone else's thoughts. I'd appreciate any help or advise anyone has to offer. Thank you.

Explanation / Answer

The Journal entries are made as follows: A) Purchase of raw material Raw material Debit Accounts payable Credit B) Issue of raw material as Direct material to production Work in process Debit Raw material Credit C) Issue of Raw material as Indirect material to production Mafg. Overhead Debit Raw Material Credit I hope this will make your understanding Clear.

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