Page 160 - F2 - MA Integrated Workbook STUDENT 2018-19
P. 160
Chapter 7
6.1 Over absorbed overheads
Example 9
If $28,500 of overheads were absorbed into work in progress:
Production overhead account
$ $
Actual overhead incurred 24,000 Work in progress 28,500
Over absorption 4,500
–––––– ––––––
28,500 28,500
Production overhead over absorption account
$ $
Production overhead 4,500
––––––
To take this over absorption to the statement of profit or loss, the entry would
be:
Debit Production overhead over absorption account
Credit Statement of profit or loss
A credit to the statement of profit or loss reduces the cost which makes sense
as we have absorbed too much overhead.
Note: If there is no production overhead over absorption account, the over
absorption can be taken straight to the statement of profit or loss. The entry to
record the over absorption would be:
Debit Production overhead account
Credit Statement of profit or loss
152
