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"At the end of July, the first month of the current fiscal year, the factory overhead account had a debit balance. Which of the following describes the nature of this balance and how it would be reported on the interim balance sheet?"

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sadddamkashmiri801

Answer:

At the end of the year the factory accounts are closed and the balances are transferred to Cost of Goods Sold account.

Explanation:

This is in-accordance to the International Financial reporting standard which says that the net effect of expenses and the sales (profit after tax) for the year must be tranferred to balance sheet and the accounts must be closed. The expenses that are directly attributable expense to product costs are allocated to cost of goods sold.

So the entry the entry would be:

Dr Cost of Goods sold   XX

Cr              Factory overheads    XX

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