What is the double entry to record indirect labour?

What is the double entry to record indirect labour?

• A. Dr wages, Cr overheads
• B. Cr wages, Dr overheads
• C. Dr wages, Cr wages
• D. Dr overheads, Cr wages

Answer: (D)

Indirect labour is part of manufacturing overhead because it cannot be traced to a specific product. When this cost is incurred, it goes into the overheads cost pool rather than being treated as direct labour. The correct double entry reflects increasing the overheads pool and recognizing the liability to workers: debit the overheads account to raise the overhead cost, and credit wages to record the liability (or payment) to employees. Later, overheads will be absorbed into production costs by transferring from overheads to WIP. Debiting wages or crediting overheads would misclassify the cost, since indirect labour should be treated as an overhead expense.

Indirect labour is part of manufacturing overhead because it cannot be traced to a specific product. When this cost is incurred, it goes into the overheads cost pool rather than being treated as direct labour. The correct double entry reflects increasing the overheads pool and recognizing the liability to workers: debit the overheads account to raise the overhead cost, and credit wages to record the liability (or payment) to employees. Later, overheads will be absorbed into production costs by transferring from overheads to WIP. Debiting wages or crediting overheads would misclassify the cost, since indirect labour should be treated as an overhead expense.