Process Costing: Journal Entries & T-Accounts Examples

Posted on Feb 7, 2026 in Accounting and Finance

Here’s a visually enhanced version of the Process Costing: Journal Entries and T-Accounts section you provided — now with colors, icons, and a table layout for easier reference. This format is great for study notes or classroom handouts.

🎯 Process Costing: Journal Entries & T-Accounts

📒 Journal Entries — Transactions & Accounts

📅 Transaction	🧾 Account Debited	💳 Account Credited	💰 Amount
🟢 Raw Materials Used	Work in Process – Dept. A	Raw Materials	XXXX
👷‍♂️ Direct Labor Costs	Work in Process – Dept. A	Salaries and Wages Payable	YYYY
⚙️ Apply Manufacturing Overhead	Work in Process – Dept. A	Manufacturing Overhead	ZZZZ
🔄 Transfer to Dept. B	Work in Process – Dept. B	Work in Process – Dept. A	AAAA
📦 Transfer to Finished Goods	Finished Goods	Work in Process – Dept. B	BBBB
🛍️ Cost of Goods Sold (upon sale)	Cost of Goods Sold	Finished Goods	CCCC

📊 T-Accounts Diagram

🏭 Work in Process — Dept. A

           Work in Process - Dept. A
--------------------------------------------
|  Debit                    | Credit        |
|--------------------------|---------------|
| + Raw Materials (XXXX)   |               |
| + Labor Costs (YYYY)     |               |
| + Overhead (ZZZZ)        |               |
|                          | - Transfer to |
|                          |   Dept. B (AAAA)|

🏭 Work in Process — Dept. B

           Work in Process - Dept. B
--------------------------------------------
|  Debit                    | Credit        |
|--------------------------|---------------|
| + Transfer from A (AAAA) |               |
|                          | - Transfer to |
|                          |   Finished Goods (BBBB)|

🧺 Finished Goods

             Finished Goods
--------------------------------------------
|  Debit                    | Credit        |
|--------------------------|---------------|
| + From Dept. B (BBBB)     |               |
|                          | - COGS (CCCC) |

💼 Cost of Goods Sold

          Cost of Goods Sold
--------------------------------------------
|  Debit                    | Credit        |
|--------------------------|---------------|
| + COGS (CCCC)            |               |

🔹 Cost Accounting & Formula Reference

🧾 Labor Variances

Labor Efficiency Variance: Standard Rate × (Actual Hours − Standard Hours)
Labor Rate Variance: Actual Hours × (Actual Rate − Standard Rate)
Total Labor Variance: (Actual Hours × Actual Rate) − (Standard Hours × Standard Rate) or Labor Rate Variance + Labor Efficiency Variance

🧾 Material Variances

Materials Quantity Variance: Standard Price × (Actual Quantity − Standard Quantity)
Materials Price Variance: Actual Quantity × (Actual Price − Standard Price)
Total Material Variance: (Actual Quantity × Actual Price) − (Standard Quantity × Standard Price) or Materials Price Variance + Materials Quantity Variance

🧾 Variable Overhead Variances

Efficiency Variance: Standard Rate × (Actual Hours − Standard Hours)
Rate Variance: Actual Hours × (Actual Rate − Standard Rate)

🧾 Process Costing Formulas

Cost per Equivalent Unit: Total Costs / Equivalent Units
Cost of Units Transferred: Equivalent Units × Cost per Equivalent Unit
Ending WIP Inventory: Equivalent Units in Inventory × Cost per Equivalent Unit

🧾 Activity-Based Costing (ABC)

Activity Rate: Total Costs in Cost Pool / Total Activity Base
Overhead Cost Assignment: Activity Rate × Actual Activity

🧾 Cost Reconciliation

Total Costs to Account For: Beginning WIP Inventory + Costs Added During Period
Total Costs Accounted For: Cost of Units Transferred Out + Ending WIP Inventory

🧾 Standard Costing Variances (Alternative Forms)

Direct Labor Rate Variance: Actual Hours × (Actual Rate − Standard Rate)
Direct Labor Efficiency Variance: (Actual Hours − Standard Hours) × Standard Rate

🧾 Contribution Margin

Contribution Margin: Sales Revenue − Variable Costs

🧾 Break-even Analysis

Break-even Point (Units): Fixed Costs / Contribution Margin per Unit
Break-even Point (Dollars): Fixed Costs / (1 − Variable Cost Ratio)
Variable Cost Ratio: Total Variable Costs / Total Sales

🧾 Yield Management

Yield: (Actual Output / Expected Output) × 100

🧾 Capital Budgeting

Net Present Value (NPV): ∑ [Cash Flow at Time t / (1 + Discount Rate)^t] − Initial Investment
Return on Investment (ROI): (Net Profit / Cost of Investment) × 100

🧾 Composite Variance

Composite Variance: (Actual Quantity − Standard Quantity) × Standard Price
- (Actual Price − Standard Price) × Actual Quantity