Purposes of back flash costing :-
The purposes of back flash costing is to identify the non value added cost and taking the proper steps to eliminate such non value added cost.
Journal entries in the Back flash costing;-
01. For purchase direct materials
Raw and in wip control A/C DR-****
Account payable control account CR***
02. Incurred for conversion cost
Conversion cost control Account DR**
Varies Account (Wages payable Account) CR**
03. For Completion of finished goods
Finished goods control Account DR**
Raw and in wip control A/C CR-****
For Conversion cost Allocated CR**
04. For Sales of finished goods
Cost of goods sold Account DR**
Finished goods control Account CR**
Account receivable DR***
Sales CR**
05. For under allocation of conversion cost
Conversion cost allocation DR***
Cost of goods sold DR**
Conversion cost control Account CR**
06. When conversion cost apply to 20100 completed units @tk.80per
Raw & in process inventory DR**tk.1608000
Conversion cost CR** tk.1608000