Backflush accounting is subject to the following problems: requires an accurate production count the number of finished goods produced is the multiplier in the backflush equation, so an incorrect count will relieve an incorrect amount of components and raw materials from stock.
Definition: backflush costing is an accounting system that waits until all of the production processes are completed before recording any direct material usages in other words, as raw materials and work in process inventory are used during the production process, no journal entries are created to record these expenditures. In backflush costing, no costs are accounted until a product is finished after it is finished, costs are assigned over a period between the time product construction began and the time it finished that is, costs are flushed back into the past.
Backflush costing delays the costing process until the production of goods is completed costs are then flushed back at the end of the production run and assigned to the goods this eliminates the detailed tracking of costs throughout the production process, which is a feature of traditional costing systems.
Is there anyone can explain about backflush costing functionality in ax basicly in the end of production process, i need to allocate all variance cost which occured in my financial dimension between standard cost and actual cost into whether inventory of semi finished goods, finish goods, or cogs. Backflush costing allows companies to measure the true and complete costs of a production run by allowing all the associated costs of a production run to be recorded at the end of the process rather than before, during or after.
Backflush costing 04/10/2017 11 minutes to read contributors in this article this topic introduces the concept of backflush costing that is used for lean manufacturing costing for lean manufacturing enables the production flow to use the cost accumulation method that is known as backflush costing. Method of costing a product that works backwards: standard costs are allocated to finished products on the basis of the output of a repetitive manufacturing process used where inventory is kept at minimum (as in 'just in time' operations) this method obviates the need for detailed cost tracking required in absorption costing , and usually eliminates separate accounting for work-in-process.
Backflush costing is a product costing system generally used in a just-in-time (jit) inventory environment backflush costing delays the costing process until the production of goods is completed backflush costing delays the costing process until the production of goods is completed. Backflush costing is a more streamlined method for accounting for the costs to produce goods and services companies can measure the true and complete costs of a particular production run because they record all of the costs at once, at the end of the process, rather than before, during, and after the production process.
Backflush costing is the reversal of traditional costing, where traditional costing flow from accounting of inputs to outputs but backflush starts accounting only from outputs and then works back to apply manufacturing costs to units sold and to inventories. The cost accounts used in back-flush accounting may be more difficult to reconcile to financial accounts needed for reporting uses of backflush costing in cost accounting : 1 the main goal is to keep the inventory of raw materials low. Backflush costing a way to account for the cost of inventory in a just-in-time system in backflush costing, no costs are accounted until a product is finished.