Collection of Overhead or Factory Overhead

Collection of Overhead or Factory Overhead

The collection of overhead is the process of recording each item of cost in the book of accounts maintained for the purpose of ascertainment of cost of each cost centre or cost unit. The items of overhead may be collected from the following documents.

1. Stores Requisitions

A cost unit or cost centre, which receives indirect materials from the stores by submitting stores requisition form. This form contains the details like standing order number, quantity of materials, the department which uses the indirect materials and the like. The material issue analysis sheet is prepared at the end of each month to know the value of indirect materials used for a specific period.

2. Time or Job Card

Indirect wages payable by each department are collected from the time or job card. At the end of specific period, time or job card analysis sheet is prepared to know the amount of indirect wages payable.

3. Wage Sheets

Sometimes, wages sheets are also prepared and maintained in addition to the job or time card. Wage sheets analysis is also prepared periodically to know the amount of indirect wages payable. Moreover, incentives paid to the indirect labour are also disclosed in the wages sheets analysis.

4. Purchase Documents

Sometimes, some indirect materials may be purchased and consumed without passing them through stores ledger and services are also received from outside agencies. Invoices are received for these materials and/or service. These expenses are also collected for the allocation.

5. Cash Book and Petty Cash Book

All the expenses including indirect expenses are recorded in the cashbook and petty cash book. At the end of specific period, both cash book and petty cash book will be scrutinized for the purpose of collection of overhead.

6. Subsidiary Documents

Some overheads does not involve any cash outlay from the organization. For example: Depreciation, notional rent, notional interest etc. These expenses are collected by scrutinizing the various subsidiary document at the end of specific period.

7. Journal Entries

Some overheads can be collected from the books of original record i.e., Journal and necessary entries are passed in the cost ledger. It is to be noted that majority of expenses are to be apportioned to Factory overhead, Administration overhead, Selling and Distribution overhead.

It should be remembered that some items of expenses are not solely attributable to factory overhead. Hence, such expenses must be apportioned among factory overhead, administration, selling and distribution overheads on suitable basis.

Leave a Reply




Recent Posts


Related pages


exceptions to the doctrine of privity of contractadvantages and disadvantages of centralisation and decentralisationadvantages and disadvantages of the factory systemspecialty goods definitionwhat are the books of accountingcartel definition economicsadvantages of democratic leadershipmeaning of perpetual inventorydiversification definition marketingrole purchasing officerretail industry current ratio averageessential elements of a chequeexplain factors affecting pricing decisionsdisadvantages of petty cash bookexample of a consumer cooperativemerger definition economicsdefine target costingadvantages and disadvantages of simple random samplingumbrella branding strategydecentralization benefitsgeneralized system of preferencessampling techniques probability and nonprobabilityprivileges of a holder in due courselease agreement for plant and machinerytick mark auditmeaning of e commerce in hindiadvantages and disadvantages of bretton woods systemuganda securities exchange listing requirementsdifference between variable and absorption costingunderwriter meansemploye empowermentwhat are the advantages of socialismadvantages and disadvantages of capitalist economic systemadvantages and disadvantages of democratic leadership styleduties of a baileewhat is centralization of authoritywhat is the accounts receivable turnover rationpv limitationsprocess costing industriesadvantages and disadvantages of cooperative learningnumeric filing system advantages and disadvantagesfour types of buying behaviorconvenience sampling definition statisticstypes of taxes progressive regressive proportionalunderwritingsspot markets versus futures marketsweaknesses of irrcredit rating information services of india ltd crisilbill of exchange promissory noteunderwriting commissionintinerant meaningobservational research advantages and disadvantagescredit control by rbiwhat is an example of a vertical mergerdeclare a dividendwhat are the disadvantages of the seniority systemtypes of bill discountingp&g branding strategyinternal auditor meaningconcentrated market segmentationwhat is the meaning of draweewhat is doctrine of privityadvantages and disadvantages of magazine advertisingprecie writingwhat is figurehead in managementprocess of securitization with examplefinancial leverage calculationgratuitous bailmentdefinition of consumer behavior by kotlercalculate direct materialswhat is a promoter in company lawsporadic dumpingdefine stock speculation