Back-flush

[dragoon_alex]

Can anyone explain and give me more details or examples about back-flush accounting system?

Thanks

[Asif]

i will tell you in some days

[Lightwarrior]

Can anyone explain and give me more details or examples about back-flush accounting system?

Thanks

Hi

Thats an easy topic , I saw good explaination in these books of GTG . They are great!

Why dunt u buy 'em ?

[Nalinee]

Can anyone explain and give me more details or examples about back-flush accounting system?

Thanks

Hi,

Back-flush accounting

the costing system related to JIT.
is focuses on output.
makes accounting entries only when goods are completed.
reduces number of entries and thereby saves time considerably.
assigns costs to products that are sold & to units in ending inventory.

Example
Accounting procedure when raw materials & components are purchased on credit:

Dr ------ RIP account
--------- Cr------- Payable account
(Purchase of raw materials & component on credit)

This concept is explained in more detail along with examples in the GTG study text.

Hope this will hlep you.

All the best !
Nalinee

[madalitso]

Backflush accounting is suitable for JIT( Just In Time) operations and it involves maintenance raw materials & WIP account together with a finished good account.The operations enables purchasing,production and sales to occur in quick succession with stock being maintained at minimum levels.Full article available in student accountant of May 2004.

[Keyperson]

The manufacturing cost information for March
Purchase of raw material = $4,250
Labour = $2,800
Overhead = $1,640

Finished good manufactured = 180 units
Sales units = 145 units

Standard cost per unit
Direct material = $20
Direct labour = $15
Overhead = $9

Assume that there were no opening stock of all types and no material variances arise during March


Answer

1. Dr. conversion cost $4,440
Cr. Creditor $4,440

2. Dr. Raw & in progress $4,250
Cr. Creditor $4,250

3. Dr. Finished goods $7,920
Cr. Creditor (180 x $20) $3,600
Cr. Conversion cost $4,440

4. Dr. Cost of sales (145 x $44) $6,380
Cr. Finished goods $6,380


Notes :
1) Closing stocks at month end = $1,540
2) Conversion cost = Direct labour + Overhead
3) Conversion cost are not applied to output until they are completed or even sold.
4) All stocks are valued at standard costs.
5) Double entry is unlikely to be examined in this paper, the emphasis is on
explanation and discussion.


Hope this help!!!!!