Applied manufacturing overhead is recorded as a credit to which account?

Applied manufacturing overhead is recorded as a credit to the Manufacturing Overhead account. This process occurs because the Manufacturing Overhead account is a temporary account used to allocate overhead costs to production when they are incurred. When manufacturing overhead is applied to production, it reflects the estimated overhead costs that will be assigned to the goods manufactured.

This credit entry decreases the balance in the Manufacturing Overhead account, which is then balanced with actual overhead costs incurred later. The allocation of applied overhead diffracts the cost of producing items, ensuring that all production costs accurately reflect the resources used during manufacturing. This accounting practice allows for better cost tracking and management of manufacturing expenses within the overall production process.