Question

Contrast the primary focus of job order cost accounting and process cost accounting.

what are the similarities between a job order and process cost system ?

1. Contrast the primary focus of job order cost accounting and process cost accounting. 2. What are the similarities between a job order and process cost system?

Answer 1

Differences in  job order cost accounting and process cost accounting may be as following:

1. Work-in-process: Under Job Cost accounting, there will be generally One 'Work-in-process' inventory a/c maintained. On the other hand, each process under the Process cost accounting system will have its own 'Work-in-process' inventory a/c maintained. In short, single WIP a/c in Job Costing and Multiple in case of Process costing.
2. Costs chargeability: All costs relating to the job will be accumulated and charged to the individual jobs whereas all costs will be accumulated and charged to the units on the basis of process.
3. Suitability: Job cost accounting is suitable if the costs and work connected in making one unit or a set of units is different from that of other unit or set of units. For example, Jewellery industry, Audit and accounting work,etc. On the flip side, process cost accounting is suitable when the costs and work connected in making an unit/set of units is similar and no costs can be specifically identified on a single unit, instead on set of units undergone the process. Examples may be manufacturing industry, etc

The similarities in a job order and process cost system may be as following:

• Both systems are used in order to arrive at the costs.
• Both systems required maintaining accounts for materials, labor, overheads and chargeability to the process/job is made by transferring a sum to 'Work-in-process' a/c. Completed units are transferred from this a/c to 'Finished Goods a/c'
• Overheads are charged on a pre-determined rate based on direct labor hours used or machine hours utilized.