Direct Materials

Definition: Raw materials traceable to product

Scope:ModerateDifficulty:Easy

Raw materials traceable to product

Common Journal Entries
AccountDebitCredit
1. Purchase raw materials
Buy $10,000 of materials on account.
Raw Materials InventoryAsset+$10,000
Accounts PayableLiability+$10,000
Materials received and available for production.
2. Issue to production
Requisition $8,000 of materials.
Work-in-Process InventoryAsset+$8,000
Raw Materials InventoryAsset−$8,000
Direct materials become part of product cost.

T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.

Raw Materials InventoryRaw Materials InventoryAssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$10,000.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$8,000.00
$2,000.00
Accounts PayableAccounts PayableLiabilityAn obligation the business owes to others. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$10,000.00
Normal bal. ▶
$10,000.00
Work-in-Process InventoryWork-in-Process InventoryAssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$8,000.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$8,000.00
DurationN/A

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