Essay on Debate between Job Order Costing and Process Costing

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Debate between Job Order Costing and Process Costing

Table of Content

1. Job Order Costing (JOC) 2
2. Process Costing (PC) 3
1. Last-In-First-Out (LIFO) 4
2. First-In-First-Out (FIFO) 5
3. Comparison between LIFO and FIFO 6
Case 1 – Law Firm 7
Case 2 – Furniture Manufacturing Industry 7
Case 3 – Bakery 8


This report to distinguish between and identify companies that may use the “Job Order Costing” and “Process Costing” which are the major types of costing systems that used in manufacturing and service company. Both of the costing methods are widely used to track costs and will be selected upon the level of details needed and the desires of management. Details will be described in Part 2.

Other than the costing systems, we should have good inventory control system as well. Inventory may consist of finished goods, work-in-process, raw materials, goods for resale and spare parts that held by the company. It is important to have a control system to the inventory and record down the value of inventory as to ensure the availability of inventory items and prevent from excessive of inventory, which may lead the company out of cash flow. A perpetual system should be maintained on continuous basis to record down the inventory changes and periodic system will be updated periodically.

Last-in-first-out (LIFO) and First-in-first-out (FIFO) are two different ways of accounting methods that set a value to the inventory and calculating the profit, manage and record down the inventory and financial transactions that involved in a compa...

... middle of paper ...

...d for a long time or being destroyed. This may lead the loss to the business.


According to the above, FIFO are generally applied while the relevant taxation departments don’t accept LIFO. It is because the actual costs of production overstated and net income will be less, thus, taxation payment will be lower. On the other hand, LIFO is attracted as it may lead the company has higher cash flow as lower taxation payment and it buffers the effects of inflation.

FIFO are widely used because of it is easier for the employee to manage the inventory account which is not as complicated as the LIFO. The employee just need to check out the item price at the current stock records while LIFO requires employee to amend the record once new item price come in.

Overview the LIFO and FIFO, FIFO are more acceptable and applicable to nowadays business.

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