A job order cost accounting system is fully integrated into the general ledger of a company. Identify the major general ledger accounts used in a job order cost system. Explain how manufacturing costs flow through these accounts so that inventories may be costed and income determined when goods are sold.

When a job order cost accounting system is fully integrated into the general ledger of a company the major general ledger accounts used are Raw Materials Inventory Factory Labor Manufacturing Overhead Work in Process Inventory and Finished Goods Inventory. As manufacturing costs are incurred they are debited to the Raw Materials Inventory Factory Labor and Manufacturing Overhead accounts. As materials are used labor is assigned or overhead is applied the costs are taken out of these accounts and debited to Work in Process Inventory. When jobs are finished the costs flow from the Work in Process Inventory account to the Finished Goods Inventory account and when jobs are sold the costs are transferred to Cost of Goods Sold from Finished Goods Inventory.