Scribd
Upload
1K views15 pages

Backflush Cosing

Backflush costing is a method of assigning manufacturing costs to work-in-progress and inventories by working backwards from finished outputs. It avoids maintaining separate work-in-progress accounts and focuses first on outputs to allocate costs between cost of goods sold and inventories. Traditional costing uses sequential tracking from materials to finished goods to sales, while backflush costing can simplify systems by not recording transactions for work-in-progress, materials, or finished goods production.

Uploaded by

api-3730425
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
1K views15 pages

Backflush Cosing

Backflush costing is a method of assigning manufacturing costs to work-in-progress and inventories by working backwards from finished outputs. It avoids maintaining separate work-in-progress accounts and focuses first on outputs to allocate costs between cost of goods sold and inventories. Traditional costing uses sequential tracking from materials to finished goods to sales, while backflush costing can simplify systems by not recording transactions for work-in-progress, materials, or finished goods production.

Uploaded by

api-3730425
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 15

Backflush Costing

By Group -- 5
What is Backflush Costing?

“Backflush Costing is a method that


works backward from the output to
assign manufacturing costs to work-
in-progress and inventories”
Some key Points
 The term ‘Backflush’ is used because costs are
flushed back through the production process to
the point at which inventories remain

 Backflush Costing avoids detailed accounting


transactions as, no separate accounts are
maintained for work-in-progress in blackflush
accounting.

 In Backflush Costing, first focus, is on the output


of the organization and work backwards to
allocate costs between costs of goods sold and
inventories.
Traditional Costing
“Traditional normal and standard
costing systems use sequential
tracking. Under sequential tracking,
recording of journal entries follows
the same order in which the four
stages of purchases of material,
work-in-process, finished goods and
sales take place.”
Comparison
Backflush Costing Traditional Costing
The Process
The process begins
from the Stage A i.e.
Purchase of Direct
Material followed by
Stage B where in
actual production
starts and Work comes
under progress.
Finished Goods
produced forms Stage
C followed by their sale
i.e. Stage D.
Thus We Can Say;
How Can Backflush Costing Help ?

“Back flush costing can simplify


traditional job costing systems
by not recording journal entries
for work-in-process, purchase of
raw material or production of
finished goods”
How does it works?
Costs Flow Through T
Accounts
Direct materials costs are charged directly
to the Cost of Goods Sold account

Direct labor and manufacturing overhead


costs are combined in the Conversion
Costs account and transferred to the Cost
of Goods Sold account

Once all product costs for the period have


been entered into the Cost of Goods Sold
account, calculate the amounts to transfer
back to the inventory accounts
Calculating amounts transferred
back to Inventory Account
 Finished Goods  Work in Process
Inventory account Inventory account

 Difference between  Amount charged to


the cost of units the Cost of Goods
sold and the cost of Sold account during
completed units the period less the
actual cost of goods
finished during the
period
Journal Entries
Particulars Dr/Cr Amoun
t
Inventory: Material and In Process Dr. XXX
Control
ConversionTocosts
Accounts Payable Control
control Dr. XXX
To Various Accounts
(such as Wages Payable)
Finished Goods Control Dr. XXX
To Inventory: Material
& In Process Control
To Conversion costs
allocated
Journal Entries Cont…
Particulars Dr/Cr Amoun
t
Cost of goods Sold Dr. XXX
To Finished goods control
Conversion Costs allocated Dr. XXX
(Cost of goods sold)
To Conversion costs control
Reasons for using Backflush Costing

 To remove the incentive for


managers to produce for inventory.

 To get managers more focused on


selling units.
THANK
YOU !!!

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy