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Job-order and process costing systems.

Compare and contrast job-order and process costing systems.
How can events in a job-order costing system affect financial statements? Provide a specific example.
How can events in a process costing system affect financial statements? Provide a specific example.

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Sample Answer

here is a comparison of job-order and process costing systems:

Job-order costing	Process costing
Used to track costs for specific jobs or projects.	Used to track costs for similar products or services that are mass-produced.
Each job has its own set of costs.	Costs are averaged over all units produced.
More complex and time-consuming to set up.	Less complex and time-consuming to set up.
More accurate for tracking costs of unique or custom-made products.	Less accurate for tracking costs of unique or custom-made products.
More flexible and can be adapted to different types of businesses.	Less flexible and is typically used by businesses that mass-produce products.

Full Answer Section

Here are some examples of how events in a job-order costing system can affect financial statements:

Purchase of raw materials: When raw materials are purchased, they are recorded as an asset on the balance sheet.
Direct labor costs: When direct labor is incurred, it is recorded as an expense on the income statement.
Overhead costs: Overhead costs are allocated to jobs and recorded as an expense on the income statement.
Completion of a job: When a job is completed, the costs associated with the job are transferred from work in process inventory to finished goods inventory.
Sale of a product: When a product is sold, the cost of goods sold is recorded as an expense on the income statement.

Here are some examples of how events in a process costing system can affect financial statements:

Purchase of raw materials: When raw materials are purchased, they are recorded as an asset on the balance sheet.
Direct labor costs: When direct labor is incurred, it is recorded as an expense on the income statement.
Overhead costs: Overhead costs are allocated to production and recorded as an expense on the income statement.
Transfer of units to finished goods inventory: When units are transferred to finished goods inventory, the costs associated with the units are transferred from work in process inventory to finished goods inventory.
Sale of a product: When a product is sold, the cost of goods sold is recorded as an expense on the income statement.

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