Job costing is used when every unit of output is different — think of a printing press printing 500 wedding cards for Sharma Ji versus 200 letterheads for Rajesh & Co. Pvt. Ltd. Each order is unique, so costs are collected separately for each job. This is the backbone of industries like construction, ship-building, advertising agencies, repair workshops, and custom furniture makers.
The core document in job costing is the Job Cost Sheet (also called a Job Card). Every job gets its own cost sheet numbered uniquely (e.g., Job No. 101). Costs are collected under three heads: Direct Materials (issued via material requisition notes), Direct Labour (tracked via time cards or job cards), and Overheads (absorbed using a predetermined overhead absorption rate, usually based on direct labour hours or machine hours). The moment a job is completed and transferred to the customer, costs move from Work-in-Progress to Cost of Goods Sold. Uncompleted jobs stay as WIP (closing).
The formula is beautifully simple: Total Job Cost = Direct Materials + Direct Labour + Overheads Absorbed. Profit is then: Selling Price − Total Job Cost. One critical exam point — overheads are absorbed (pre-determined), not actual. This means there will almost always be over- or under-absorption of overheads, which is adjusted in the Costing Profit & Loss Account at year end. This distinction between absorbed and actual overhead is asked very frequently as a 5–8 mark numerical in Paper 4. Also remember: when a job is done on a cost-plus basis, the contract price = Total Cost + Agreed Profit Margin. Get comfortable with that setup.