CIMA BA2 · Chapter 8 · Question 4 of 9
At the end of a period, production overheads have been UNDER-absorbed. In an integrated accounting system, what entry transfers the under-absorption?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Debit Income statement (profit or loss), Credit Production overhead control account
Explanation
Under-absorption leaves a debit balance on the production overhead control account (actual overheads exceed absorbed overheads). It is cleared by crediting the control account and debiting the income statement, which reduces profit.
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