Group 3 – Document Flowchart

Definitions of Terms

Inventory Status Report – records the inventory level of raw materials, work in process and finished goods.

Factor Availability Report – states the available production capacity. It contains how much resource such as labor, land, capital etc are available.

Production order - authorizes the unit production

Cost Accounting Department – Department in which the amount of direct materials used, labor and overhead are recorded in the WIP records.

Material Requisition – shows the quantity of materials needed (both direct and indirect materials)

Production Schedule – shows when the products would be produced

Journal Voucher – document that contains the journal entries to update the general ledger

Completed Production Order – contains production order and material requisition and is used to summarize production

Job time Cards – records working hours of labor (the activities of labor) (both direct and indirect labor)

Production Status

shows the progress of production

Step 1-2

The Inventory Control Department records the inventory level of raw materials, work in process and finished goods in the Inventory Status Report and sends the report to the Production Control.

The Production Department sends their Factor Availability Report, which states the available production capacity, to the Production Control Department.

With the Factor Availability Report, the Production Control Department knows how much resource such as labor,factory and machine availability, etc, are available for production. With the Inventory Status Report, the Production Control Department can check if there is a need to produce additional products.

If there is a need to produce additional products, the Production Control Department makes three copies of Production orders which authorize the unit production to begin.

The first copy is sent to the Cost Accounting Department in which the amount of direct materials used, labor and overhead are recorded in the WIP records.

The second copy is sent to the Production Department (the factory floor) and the third copy is filed numerically in the Production Control Department.

Step 3

In order to produce goods, raw materials are required and four copies of Material Requisition are written in the Production Control Department. Each material requisition shows the quantity of materials needed and the first three copies are sent to the Inventory Control Department. The fourth one is filed numerically in the Production Control Department.

Step 4

In the Inventory Control Department, one copy of material requisition is sent to the Cost Accounting Department and it is posted to WIP records

Dr WIP

Cr Raw Materials

The second copy of Material Requisition is sent to the Production Department. When production is complete the Material Requisition is attached to the Production Order 2 to form a completed Production Order.

The last copy of Material Requisition is filed numerically in the Inventory Control Department.

Step 5

Two copies of Production Schedule are produced in the Production Control Department. One is filed by date in the department and another one is sent to the Production Department.

Step 6

In the Inventory Control Department, the Journal Voucher which indicates the use of raw material is sent to the General Ledger Department where materials are placed in Production.

Step 7

The completed Production Order, which contains Production Order 2 and the Material Requisition 2, is sent to the Inventory control Department from the Production Department.

Step 8

The Inventory Control Department uses the completed production order to post to the Inventory Records. Then the order is sent to the Cost Accounting department to summarize production and the completed production cost report is then sent to the Management.

Step 9

In the Production Department, the workers record the working hours on the Job Time Cards and those cards are sent to the Cost Accounting Department and the Cost Accounting department posts the direct and indirect labor cost into WIP records.

Step 10

In the Production Department, the Production Status, which shows the progress of production, is sent to the Production Control Department.

Step 11

In the Cost Accounting Department, the first Production Order is used to post the manufacturing overhead to the WIP records.

Dr Work In Process

Cr factory overhead

Step 12

Besides, the cost accounting department uses the material requisition 1 to post the material used in Work in Process records.

Dr Work In Process,

Cr Raw materials

Step 13

In Cost Accounting department, a journal voucher is created and is sent to the General Ledger department where the conversion cost (labor and overhead) is posted to determine the total cost of the production.

Step 14

Another Journal Voucher is created in the Cost Accounting department and is sent to the General Ledger department to post the cost of goods manufactured.

Dr Finished Goods

Cr Work In Process

Step 15

The management in the General Ledger department reviews the completed production order.