Over-absorption of overhead will be shown on which side of the SPL?

Over-absorption of overhead will be shown on which side of the SPL?

• A. Debit (Dr)
• B. Neither
• C. Both
• D. Credit (Cr)

Answer: (D)

Over-absorption occurs when the overheads absorbed into production exceed the actual overheads incurred. In the profit and loss statement, overheads charged to production reduce profit as expenses. When there is over-absorption, the excess overhead is effectively a gain relative to the actual cost, so it appears as a credit—reducing the expense charged to the SPL and boosting reported profit. If overheads were under-absorbed, that would show as a debit (an extra expense) in the SPL.

Over-absorption occurs when the overheads absorbed into production exceed the actual overheads incurred. In the profit and loss statement, overheads charged to production reduce profit as expenses. When there is over-absorption, the excess overhead is effectively a gain relative to the actual cost, so it appears as a credit—reducing the expense charged to the SPL and boosting reported profit. If overheads were under-absorbed, that would show as a debit (an extra expense) in the SPL.