The Accounting for the Allocation of Overhead Costs Is a Three-Step

question 133

Essay

The accounting for the allocation of overhead costs is a three-step process and occurs at three different points in the accounting cycle.List each of the three steps.For each step indicate when the step occurs and why the step is needed.

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Definitions:

Adjusted Trial Balance

A listing of all company accounts and their balances after adjustments, used to ensure that debit and credit balances are equal before generating financial statements.

Adjusting Entries

Journal entries made at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred, ensuring the accounts reflect these adjustments before financial statements are prepared.

Asset Balances

The value of different types of assets that a company owns, as recorded in the balance sheet at a particular point in time.

Liability Balances

The amount of money a company owes to creditors or other parties, reflected in its balance sheet.