What is the correct double entry for indirect labour?

What is the correct double entry for indirect labour?

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

Answer: (B)

Indirect labour is treated as a manufacturing overhead, not as a direct wage cost. When the indirect labour cost is recognised, you increase the overheads pool and reduce the wages source of that cost. So the correct double-entry is to debit the overheads account and credit wages. For example, if £500 of indirect labour is incurred, you would record Debit Manufacturing Overheads £500 and Credit Wages £500. This moves the cost into overheads to be allocated to production later. When applying overheads to products, you'd then Debit Work in Progress and Credit Manufacturing Overheads for the allocated amount.

Indirect labour is treated as a manufacturing overhead, not as a direct wage cost. When the indirect labour cost is recognised, you increase the overheads pool and reduce the wages source of that cost. So the correct double-entry is to debit the overheads account and credit wages. For example, if £500 of indirect labour is incurred, you would record Debit Manufacturing Overheads £500 and Credit Wages £500. This moves the cost into overheads to be allocated to production later. When applying overheads to products, you'd then Debit Work in Progress and Credit Manufacturing Overheads for the allocated amount.