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Hello,
Question is related to Inventory costing. Indirect cost here is type of cost that should be included to inventory value.
My scenario is as: I buy a product in fiscal year 2019 from vendor for 100$ with no tax and then there is 20$ Indirect cost.
My Gen ledger entries are as:
- Purchases (Income): 100 (Dr)
- Payable (Bal. Sheet): 100 (Cr)
- Direct Cost App (Income): 100 (Cr)
- Over Head (Income): 20 (Cr)
- Inventory(Direct): 100 (Dr)
- Inventory(Indirect): 20 (Dr)
Suppose in fiscal year 2019 my item remained unsold and while closing income statement there is 20$ seen in Overhead account of income statement. As per accounting rules there must not be any costs for inventory until they are sold. So is this correct ? Or is there a way to do some process before so to keep income statement correct.
first check the setup of the that item according usage of overhead/indirect costs, if that is set correctly.
for details follow docs.microsoft.com/.../finance-about-calculating-standard-cost
overhead costs can be costs logistics/carrying.
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