A company debits overhead applied account, debits cost of goods sold account and credits overhead costs account. Why? This is a wrong entry. The company closes the applied accounts with the relevant cost account while selling a product. The company is accounting for the normal capacity variance while closing the applied and cost accounts. The company is adjusting the cost of goods sold account due to a damage in the production process.

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A company debits overhead applied account, debits cost of goods sold account and credits overhead costs account

Accounting Jan 26, 2021

A company debits overhead applied account, debits cost of goods sold account and credits overhead costs account. Why?

This is a wrong entry.
The company closes the applied accounts with the relevant cost account while selling a product.
The company is accounting for the normal capacity variance while closing the applied and cost accounts.
The company is adjusting the cost of goods sold account due to a damage in the production process.

Expert Solution

The correct answer is

b. The company closes the applied accounts with the relevant cost account while selling a product.

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