CHAPTER

NON-INTEGRAL OR COST LEDGER ACCOUNTING SYSTEM

INTRODUCTION
Just as financial accounting system is maintained with certain objectives in view, cost accounting system is often distinctively maintained with a view to achieve its objectives. All transactions are collected from the same invoices, vouchers or receipts which are also common for financial accounts. Costs are then classified according to functions, departments or products. Though real accounts and nominal accounts are of direct relevance in ascertaining the cost of products, personal accounts and cash or bank account are not directly related to cost ascertainment. When cost accounting system is maintained it involves maintenance of certain books, for recording day-to-day transactions. It is not necessary to maintain cost accounting under double-entry system of book-keeping. However, in order to ensure arithmetical accuracy of data often the principles of double entry system of book-keeping is followed. Under double entry system cost accounts are maintained in the main ledger which is termed as cost ledger. In addition to this, many subsidiary ledgers are also maintained. In the cost ledger, control accounts are maintained pertaining to each subsidiary ledger. In addition to control accounts, two other accounts, viz, cost of sales account and costing profit and loss account are also maintained in the cost ledger, in order to match cost with revenue. Apart from these accounts, a general ledger adjustment account is opened in cost ledger to accommodate entries relating to transactions adjustable against cash, bank, debtors, creditors etc. Entries in the accounts are made once in each accounting period on the basis of periodical totals of transactions contained in subsidiary ledgers.

INTERLOCKING SYSTEM
There two systems of maintaining cost records, viz, interlocking system and integral accounting system. Under interlocking system, cost records are maintained in a separate set of books independent of financial accounting. The ICMA terminology defines interlocking system of accounting as a system in which the cost accounting are distinct from the financial accounting. The two sets of accounts being kept continuously in agreement or readily recognizable. The following are some of the advantages of interlocking accounting system: 1. When separate set of costing books are maintained it facilitates ready accomplishment of its objectives. 2. It avoids the complications of recording the entries if it is integrated with financial accounting. 3. It can be maintained according to convenience as it need not be statutorily maintained. The following are some of the limitations of this accounting system:
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METHODS AND TECHNIQUES OF COSTING

1. When cost accounting is independently maintained, it amounts to duplication of expenses along with financial accounting. 2. The profit shown by cost books may vary with that shown by financial accounting. This requires reconciliation which involves time and effort. The integral accounting system is discussed in a separate chapter.

ENTRIES TO RECORD TRANSACTIONS UNDER INTERLOCKING SYSTEM

1. Materials
(a) Purchase of materials for stock (cash or credit basis): Stores ledger control a/c To General Ledger adjustment a/c (b) Returns to suppliers: General ledger adjustment a/c To stores ledger control a/c (c) Materials purchased specifically for a job (i.e., direct issue) Work-in-progress control a/c To General ledger adjustment a/c (d) Direct material issued from stores to Job: Work-in-progress control a/c To stores ledger control a/c (e) Materials returned from jobs to stores: Stores ledger control a/c To work-in-progress a/c (f ) Issue of indirect materials: Factory overhead control a/c To stores ledger control a/c (g) Transfer of materials from one job to another: Receiving job a/c To giving job (h) Normal wastage of materials and stores: Factory overhead control a/c To stores ledger control a/c (i) Abnormal wastage of materials: Costing P & L a/c To stores ledger control a/c (j) Abnormal gain of materials: Stores ledger control a/c To costing P & L a/c Dr.

Dr.

Dr.

Dr.

Dr.

Dr.

Dr.

Dr.

Dr. Dr.

2. Labour
(a) Payment of direct wages: Wages control a/c To General Ledger adjustment a/c Dr.

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Dr.

Dr.

3. Direct Expenses
Work-in-progress control a/c To General ledger adjustment a/c Dr.

4. Overheads
(a) For recording overhead incurred and accrued: Factory control a/c Dr. Administration control a/c Dr. S & D control a/c Dr. To General ledger adjustment a/c (b) Allocation of factory overheads: Work-in-progress control a/c Dr. To factory overhead control a/c (c) Absorption of administration overhead Finished stock ledger control a/c Dr. To administration overhead control a/c (d) Absorption of selling and distribution overhead: Cost of sales a/c Dr. To S & D overhead control a/c (e) If under/over absorbed amounts are carried forward to subsequent year, the balance of each overhead a/c will have to be transferred to respective overhead suspense (or reserve) account as follows (i) Production overhead a/c Dr. To production overhead suspense a/c (For over recovery) (ii) Administration overhead suspense a/c Dr. To Administration overhead a/c (For under recovery)

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(b) Allocation of direct labour: Work-in-progress a/c To wage control a/c (c) Payment of indirect labour cost: Wage control a/c To General ledger adjustment a/c (d) Allocation of indirect labour cost: Overhead control a/c To wage control a/c (e) Normal idle time cost: Factory overhead control a/c To wage control a/c (f) Abnormal idle time cost: Costing P & L a/c To wage control a/c

Dr.

Dr.

Dr.

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METHODS AND TECHNIQUES OF COSTING

(iii)Selling and distribution overhead suspense a/c Dr. To S & D overhead a/c (For under recovery) (f) In case of under/over absorbed overheads are transferred to costing P & L a/c then the relevant entries will be as follows: (i) For over recovery: Overhead control a/c Dr. To costing P & L a/c (ii) For under recovery: Costing P & L a/c Dr. To overhead control a/c

5. Finished Goods or Completed Jobs

(a) Transfer of completed jobs or finished goods produced to finished goods ledger: Finished stock ledger control a/c Dr. To work-in-progress control a/c (b) Transfer of finished goods sold: Cost of sales a/c Dr. To finished stock ledger control a/c (c) Transfer of cost of sales a/c to P & L a/c: Costing P & L a/c Dr. To cost of sales a/c (d) To record sales: General ledger adjustment a/c Dr. To costing P & L a/c

6. Transfer of Profit or Loss

(a) In case of profit: Costing P & L a/c To General ledger adjustment a/c (b) In case of loss: General ledger adjustment a/c To costing P & L a/c Dr.

Dr.

LEDGERS MAINTAINED UNDER COST ACCOUNTING SYSTEM

Under cost accounting system the following ledgers are maintained:

1. Cost Ledger
It is the main ledger maintained in the cost department. It contains two accounts, viz (a) control account for each of the subsidiary ledgers. Some of the control accounts maintained in this ledger are stores ledger control account, work-in-progress ledger control account, etc. (b) cost ledger control account to make the cost ledger self balancing.

2. Stores Ledger
All transactions relating to materials are found in this ledger. It contains a separate account for each item of stores such as raw materials, component parts, indirect materials. The

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353

concerned material account is debited with materials received and credited with materials issued. The entries in each account is made from the invoice, materials received note, material requisition note, etc. The balance in this account represent the cost of unused materials.

3. Work-in-Progress Ledger
This is also known as job ledger. It contains a separate account for each job or work-inprogress. The elements of cost is debited to this account and is credited with the amount of finished goods completed and transferred. The balance in this account represent cost of incomplete job.

4. Finished Goods Ledger

This ledger contains a separate account for each item of finished product or completed job. This account is debited with the cost of finished product and the amount of administration overhead absorbed and credited with the cost of goods sold. The balance in this account shows the closing stock of finished goods in terms of value.

Control Accounts
Under interlocking system, control accounts are maintained in the cost ledger to complete double entry in cost books. These control accounts are nothing but total accounts or adjustment accounts summarising mass of information contained in the subsidiary ledgers, i.e., stores ledger, job ledger and finished stock ledger. A control account is maintained in the cost ledger so that double entry in the cost ledger may be completed and make it self-balancing. These control accounts are posted with the totals of items which have been debited or credited in detail to the accounts in the ledgers to which they relate. The balance in control accounts represents the total of balances in a number of accounts of similar nature maintained in that subsidiary ledger to which the control account relates. For example, the balance in stores ledger control account represents in aggregate the detailed balances of stores accounts. In addition to these control accounts for each of the subsidiary ledger, a cost ledger control account is also kept in cost ledger. This is operated to make the cost ledger selfbalancing.

Advantages
1. It provides a check for ensuring that all expenditure is accounted for in cost accounts with the help of control account. 2. It provides a basis for reconciliation with the financial accounts. 3. It provides a ready means of preparing monthly or periodical balance sheet, profit and loss account and statistics relating to cost.

IMPORTANT CONTROL ACCOUNTS MAINTAINED UNDER INTERLOCKING SYSTEM

The various control accounts under interlocking system are as follows:

1. Stores Ledger Control Account

This account is maintained in cost ledger. This records a summary of the value of stores received, issued and balances on hand. Receipts are posted from materials received notes to the debit side of this account. Similarly, issue of materials from material requisition or

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METHODS AND TECHNIQUES OF COSTING

material abstract is posted to the credit side of the account. Thus for each entry in stores ledger, there is a corresponding debit or credit, (though in total) in this account. The balance of this account represents the total balance of stock which should agree with the aggregate of the balances of individual accounts in the stores ledger.

2. Wages Control Account

This account records labour transactions in aggregate i.e., direct and indirect wages. This account is debited with gross wages shown in wages analysis sheet. It is closed by transfer of direct labour to work-in-progress and indirect labour to overhead, i.e., production administration or selling and distribution overhead account; as the case may be. Wages paid for abnormal idle time are transferred to costing profit and loss account.

3. Factory Overhead Control Account

This account records factory overhead expenses in aggregate. It is debited with the amount of indirect materials, indirect labour and indirect expenses as available from indirect materials analysis sheet, wages analysis sheet etc. This account is credited with the amount of overheads recovered. The balance in the control account represents under or over-absorption which is transferred to overhead adjustment.

4. Administration Overheads Control Account

This account is debited with the administrative overheads incurred and credited with the amount of administrative overhead absorbed by finished goods. Any balance in this account represent under or over-absorption of administrative overhead which is transferred to overhead adjustment account.

5. Selling and Distribution Overhead Control Account

This account is debited with the amount of selling and distribution overhead incurred and credited by the amount of such overheads absorbed by the cost of sales. Balance in this account represents under or over-absorption of selling and distribution overhead which is transferred to overhead adjustment.

6. Overhead Adjustment Account

This account is debited with under-absorbed overheads and credited with over-absorbed overhead amount. The net balance in this account is transferred to costing profit and loss account.

7. Work-in-Progress Control Account

This account represents the total work-in-progress at any time. This account is debited with the totals of materials, wages and overheads as transferred from the respective control accounts. This account is credited when a job is completed. Thus, this account shows the total value of unfinished jobs.

8. Stock Ledger Control Account

This account contains the summary of all finished goods transactions in total. It is debited with the cost of finished goods transferred from work-in-progress control account and the amount of administration overhead absorbed which is transferred from Administration overhead control account. This account is credited with the total cost of goods sold which is transferred to the cost of sales account.

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9. Cost of Sales Account

This account is debited with the cost of goods sold by transfer from finished goods ledger control account and also by the selling and distribution overhead absorbed. It is closed by transferring its balance to costing profit and loss account.

10. Costing Profit and Loss Account

This account reveals the result of the business i.e., profit or loss of the business. This account is debited with the cost of sales, abnormal losses and under-absorbed overhead and credited with the sales value, abnormal gain and over-absorbed overhead. The balance in this account represents profit and loss which is transferred to cost ledger control account.

11. Cost Ledger Control Account or General Ledger Adjustment Account

This account is also known as financial ledger control account. This account is maintained to make the cost ledger self-balancing. Cost ledger contains only impersonal accounts. As no personal accounts are kept and in order to complete double entry, it becomes necessary to debit or credit all the transactions which arise in financial accounts to cost ledger control account. In fact, the account represents the personal accounts shown in the financial ledger. For example, wages are paid to the extent of Rs. 5,000, as no cash or bank account is maintained in cost ledger, therefore, in order to complete double entry, wages account will be debited and in place of Bank or cash account. General Ledger Adjustment account in the cost ledger will be credited. Thus, all the financial transactions on account of material purchases, wages, salaries and miscellaneous expenses are credited to cost ledger control account by contra debit to various control accounts. In a similar way all the financial receipts are debited to this account. Any transfer from cost books to financial books, e.g., cost of capital, work done in the factory, will also be entered in this account. The main object of this account is to complete double entry in cost accounting. Therefore, purely cost accounting transactions say transfer entries with no relations to the finances are not passed through this account as double entry is already complete. The balance in this account represents the total of the balances of all personal accounts in the financial ledger.
Problem 1. The following figures have been ascertained from the costing records. You are required to pass the necessary entries in the cost journal. Assume that a system of maintaining control accounts prevails in the organisation. Rs. (1) Purchases 3,90,000 (2) Carriage inwards 5,850 (3) Stores issued 3,58,800 (4) Productive wages 3,46,320 (5) Unproductive wages 1,21,680 (6) Works on cost 3,48,400 (7) Materials used in repairs 3,120 (8) Cost of completed jobs 12,80,630 Solution: COST JOURNAL (1) Stores ledger control a/c To general ledger adj. a/c (Being the entry for purchase of materials) Dr. 3,90,000 3,90,000

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METHODS AND TECHNIQUES OF COSTING

(2) Stores ledger control a/c To general ledger adj. a/c (Being carriage inward treated as part of the cost of materials purchased) (3) Work-in-progress ledger control a/c To stores ledger control a/c (Being stores issued to production) (4) Wages control a/c To general ledger adj. a/c (Being payment of wages) (5) Factory overhead control a/c To cost ledger control a/c (Being indirect wages incurred) (6) Factory overhead control a/c To cost ledger control a/c (Being works overhead other than indirect wages) (7) Factory overhead control a/c To stores ledger control a/c (Being materials used in repairs)

Dr.

5,850 5,850

Dr.

3,58,800 3,58,800

Dr.

3,46,320 3,46,320

Dr.

1,21,680 1,21,680

Dr.

3,48,400 3,48,400

Dr.

3,120 3,120 12,80,630 12,80,630

(8) Finished stock ledger control a/c Dr. To work-in-progress ledger control a/c (Being completed production transferred to finished stock)

Problem 2. The following transactions pertaining to materials took place during March 2001 in ABC Company Ltd. Enter the transactions in the cost books. (1) Materials purchased Credit purchases Cash purchases Credit purchases for job no. 20 Return to suppliers Direct materials issued to jobs Indirect materials issued to jobs Materials returned from jobs to stores Materials transferred from job no. 8 to job no. 12 10,000 8,000 1,000 500 4,000 400 200 300

(2) (3) (4) (5) (6)

Solution: COST JOURNAL (1) (a) Stores ledger control a/c To general ledger adj. a/c (Being the amount of credit purchases) (b) Stores ledger control a/c To general ledger adj. a/c (Being cash purchases) (c) Work-in-progress ledger control a/c To general ledger adj. a/c (Being purchases for a special job no. 20) (2) General ledger adj. a/c To stores ledger control a/c (Being the return to supplier) Dr. 10,000 10,000 Dr. 8,000 8,000 Dr. 1,000 1,000 Dr. 500 500

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(3) Work-in-progress ledger control a/c To stores ledger control a/c (Being the direct materials issued to jobs) (4) Factory overhead control a/c To stores overhead control a/c (Being issue of indirect materials) (5) Stores ledger control a/c To work-in-progress control a/c (Being the materials returned from jobs to stores)

Dr.

4,000 4,000

Dr.

400 400

Dr.

200 200 300 300

Problem 3. Pass Journal entries in the cost books (non-integrated system) for the following transactions: (1) Materials worth Rs. 25,000 returned to stores from job. (2) Gross total wages paid Rs. 48,000. Employers contribution to PF and state insurance amount to Rs. 2,000. Wages analysis book detailed Rs. 20,000 direct labour, Rs. 12,000 towards indirect factory labour, Rs. 10,000 towards salaries to office staff and Rs. 8,000 for salaries to selling and distribution staff. (University of Delhi, B.Com. (Hons.), April 1999) Solution: JOURNAL ENTRIES (i) Stores ledger control a/c To work-in-progress a/c (Being raw materials returned to stores) (ii) Wages control a/c To general ledger control a/c (Being payment of wages) Work-in-progress control a/c Factory overhead a/c Office overhead a/c Selling overhead a/c To wages control a/c (Allocation of wages to direct and indirect cost) Dr. 25,000 25,000 Dr. 50,000 50,000 Dr. Dr. Dr. Dr. 20,000 12,000 10,000 8,000 50,000

Problem 4. As at 31st March 2001, the following balances existed in a companys cost ledger Dr. Cr. Stores ledger control a/c 6,02,870 Work-in-progress control a/c 2,44,730 Finished stock ledger control a/c 5,03,890 Manufacturing overhead control a/c 21,050 Cost ledger control a/c 13,30,440 13,51,490 During the next three months the following items arose (1) Raw materials purchased (2) Materials returned to suppliers (3) Materials issued to production Rs. 2,46,000 5,800 2,54,630 13,51,490

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(6) Job no. 12 a/c Dr. To job no. 8 a/c (Being the transfer of materials from job no. 8 to job no. 12)

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METHODS AND TECHNIQUES OF COSTING

(4) (5) (6) (7) (8) (9) (10) Pass

Factory wages Manufacturing overhead incurred Indirect labour Manufacturing overhead charged to production Cost of sales Sales returns at cost Finished product at cost the necessary entries, open ledger accounts and prepare trial balance

1,01,060 1,83,020 43,330 1,54,400 3,71,780 10,760 4,21,670

Solution: JOURNAL ENTRIES (1) Stores ledger control a/c To general ledger adj. a/c (Being materials purchased) Dr. 2,46,000 2,46,000 5,800 5,800 2,54,630 2,54,630 1,01,060 1,01,060 1,01,060 1,01,060 1,83,020 1,83,020 Dr. 43,330 43,330 1,54,400 1,54,400 3,71,780 3,71,780 Dr. 10,760 10,760 Dr. 4,21,670 4,21,670

(2) General ledger adj. a/c Dr. To stores ledger control a/c (Entry for materials returned to suppliers) (3) Work-in-progress control a/c Dr. To stores ledger control a/c (Entry for issue of materials to production) Wages control a/c To general ledger adj. a/c (Entry for direct wages incurred) Dr.

(4)

(5)

Work-in-progress control a/c Dr. To wages control a/c (Entry for direct wages charged to production) Works overhead control a/c To general ledger adj. a/c (Entry for works overhead incurred) Works overhead control a/c To general ledger adj. a/c (Entry for indirect wages incurred) Dr.

(6)

(7)

(8)

Work-in-progress control a/c Dr. To works overhead control a/c (Entry for overhead charged to production) General ledger adj. a/c To finished stock ledger control a/c (Entry for cost of sales) Dr.

(9)

(10) Finished stock ledger control a/c To general ledger adj. a/c (Entry for sales return) (11) Finished stock ledger control a/c To work-in-progress control a/c (Entry for finished goods transferred)

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GENERAL LEDGER ADJUSTMENT ACCOUNT To stores ledger control a/c 5,800 To finished stock ledger control a/c 3,71,780 To balance c/d 15,37,030 By By By By By By balance b/d stores ledger control a/c wages control a/c works overhead control a/c works overhead control a/c finished stock ledger control a/c 13,30,440 2,46,000 1,01,060 1,83,020 43,330 10,760 19,14,610

19,14,610 STORES LEDGER CONTROL ACCOUNT To balance b/d To general ledger adj. a/c 6,02,870 2,46,000 8,48,870 MANUFACTURING OVERHEAD CONTROL ACCOUNT To general ledger control a/c To general ledger control a/c 1,80,020 43,300 2,26,350 WORK-IN-PROGRESS CONTROL ACCOUNT To To To To balance b/d stores ledger control a/c wages control a/c Mfg. overhead control a/c 2,44,730 2,54,630 1,01,060 1,54,400 7,54,820 FINISHED STOCK LEDGER CONTROL ACCOUNT To balance b/d To work-in-progress control a/c To general ledger adj a/c 5,03,890 4,21,670 10,760 9,36,320 TRIAL BALANCE Dr. Cost ledger control a/c Stores ledger control a/c Manufacturing overhead control a/c WIP control a/c Finished stock ledger control a/c 5,88,440 50,900 3,33,150 5,64,540 15,37,030 By cost ledger control a/c By balance c/d By finished stock ledger control a/c By balance c/d By balance b/d By work-in-progress control a/c By balance c/d By general ledger control By work-in-progress control a/c By balance c/d

5,800 2,54,630 5,88,440 8,48,870

21,050 1,54,400 50,900 2,26,350

4,21,670 3,33,150

7,54,820

3,71,780 5,64,540 9,36,320

Cr. 15,37,030

15,37,030

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Problem 5. A fire destroyed some accounting records of a company. You have been able to collect the following from the spoilt papers/records and as a result of consultation with accounting staff in respect of January 1997. (i) Incomplete ledger entries RAW MATERIALS ACCOUNT Beginning Inventory 32,000 WORK-IN-PROGRESS ACCOUNT Beginning Inventory 9,200 Finished stock 1,51,000

CREDITORS ACCOUNT Closing balance 19,200 Opening balance 16,400

MANUFACTURING OVERHEAD ACCOUNT Amount spent 29,600 FINISHED GOODS ACCOUNT Opening Inventory 2,400 Closing Inventory 30,000

(ii) Additional information: (1) Cash book showed that Rs. 89,200 have been paid to creditors for raw materials. (2) Ending inventory of work-in-progress included materials Rs. 5,000 on which 300 direct labour hours have been booked against wages and overheads. (3) The job card showed that workers have worked for 7,000 hours. The wage rate is Rs. 10 per labour hour. (4) Overhead recovery rate was Rs. 4 per direct labour hour. You are required to complete the above accounts in the cost ledger of the company. (C.A. Inter, May 1997) Solution: CREDITORS ACCOUNT To cash & bank (1) To balance c/d 89,200 19,200 1,08,400 WORK-IN-PROGRESS ACCOUNT To To To To balance b/d raw materials (Balancing figure) wages (3) 7,000 hrs. Rs. 10 overheads (4) 7,000 hrs. Rs. 4 9,200 53,000 70,000 28,000 By finished goods By balance c/d materials (2) Labour (2) (300 hrs. 10) Overhead (2) 300 hrs. Rs. 4 1,51,000 5,000 3,000 1,200 1,60,200 By balance b/d By purchases (Balancing figure) 16,400 92,000 1,08,400

1,60,200 RAW MATERIALS ACCOUNT To balance b/d To purchases 32,000 92,000 1,24,000 By work-in-progress a/c By balance c/d

53,000 71,000 1,24,000

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FINISHED GOODS ACCOUNT To balance b/d To work-in-progress a/c 24,000 1,51,000 1,75,000 MANUFACTURING OVERHEAD ACCOUNT To sundries (Amount spent) 29,600 29,600 By work-in-progress a/c (7,000 4) By under-absorbed overhead 28,000 1,600 29,600 By cost of sales (Balancing figure) By balance c/d 1,45,000 30,000 1,75,000

Problem 6. The following balances were extracted from a companys ledger as on 31st December 1997. Raw materials control a/c Work-in-progress control a/c Finished stock control a/c Nominal ledger control a/c Rs. 48,836 14,745 21,980 85,561 Rs.

85,561 85,561

Further transactions took place during the following quarter as follows: Rs. Factory overhead allocation to WIP 11,786 Goods finished at cost 36,834 Raw materials purchased 22,422 Direct wages allocated to WIP 18,370 Cost of goods sold 42,000 Raw materials issued to production 17,000 Raw materials credited by suppliers 1,000 Inventory audit raw materials losses 1,300 WIP rejected (with no scrap value) 1,800 Customers returns (at cost) of finished goods 3,000 Prepare all the ledger accounts in cost ledger. (C.A. Inter, November 1998) Solution: RAW MATERIALS CONTROL ACCOUNT To balance b/d To nominal ledger control a/c 48,836 22,422 By By By By WIP control a/c nominal ledger control a/c nominal ledger control a/c balance c/d 17,000 1,000 1,300 51,958 71,258

71,258 WORK-IN-PROGRESS CONTROL ACCOUNT To To To To balance b/d nominal ledger control a/c raw material control a/c nominal ledger control a/c 14,745 11,786 17,000 18,370 61,901 By finished stock control a/c By nominal ledger control a/c By balance c/d

36,834 1,800 23,267 61,901

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METHODS AND TECHNIQUES OF COSTING

FINISHED STOCK CONTROL ACCOUNT To balance b/d To WIP control a/c To nominal ledger control a/c 21,980 36,834 3,000 61,814 NOMINAL LEDGER CONTROL ACCOUNT To To To To To raw material control a/c raw material control a/c finished stock control a/c WIP control a/c balance c/d 1,000 1,300 42,000 1,800 95,039 1,41,139 By By By By By balance b/d raw materials control a/c WIP control a/c WIP control a/c finished stock control a/c 85,561 22,422 11,786 18,370 3,000 1,41,139 By nominal ledger control a/c By balance c/d 42,000 19,814 61,814

Problem 7. From the following balances and transactions extracted from the books of East-West Company Ltd., journalise and write up the accounts in the cost ledger and prepare a trial balance as at 31st December 2010. Also show the profit or loss for the month: Dr. Cr. Balances as on 1.12.2010: Work-in-progress a/c 5,200 Finished goods a/c 2,300 Factory overhead suspense a/c 50 Office overhead suspense a/c 30 Stores ledger control a/c 1,150 General ledger adjustment a/c 8,730 8,730 Transactions for the month were: Direct wages Indirect wages Works overhead absorbed in production Office overhead absorbed in production Stores issued to production Goods finished during the month Finished goods sold Stores purchased Stores issued to factory repair orders Carriage inwards on stores issued for production Factory expenses Office expenses 8,730 Rs. 7,500 500 2,200 1,200 4,900 18,000 21,000 5,000 200 80 1,450 1,170

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Solution:

JOURNAL ENTRIES Dr. Dr. Dr. Dr. Dr. 5,200 2,300 50 30 1,150 8,730 Dr. 5,000 5,000 Dr. 4,980 4,980

Work-in-progress ledger control a/c Finished goods ledger control a/c Factory overhead suspense a/c Office overhead suspense a/c Stores ledger control a/c To general ledger adjustment a/c (Being the opening entries for the balances) Stores ledger control a/c To general ledger adjustment a/c (Being stores purchased) Work-in-progress ledger control a/c To stores ledger control a/c (Being the stores issued to production Rs. 4,900 and carriage inward on stores issued Rs. 80) Factory overhead control a/c To stores ledger control a/c (Being stores issued to factory repairs) Work-in-progress ledger control a/c To wages control a/c (Being direct wages charged to production) Factory overhead control a/c To wages control a/c (Being indirect wages charged to factory overhead) Wages control a/c To general ledger adjustment a/c (Being the total wages brought into costing book from financial books) Factory overhead control a/c To factory overhead suspense a/c (Being the latter transferred to former a/c) Factory overhead control a/c To general ledger adjustment a/c (Being the actual factory expenses brought into costing books) Work-in-progress ledger control a/c To factory overhead control a/c (Being the overheads charged to production) Office overhead control a/c To office overhead suspense a/c (Being suspense a/c transferred to former a/c

Dr.

200 200

Dr.

7,500 7,500

Dr.

500 500

Dr.

8,000 8,000

Dr.

50 50

Dr.

1,450 1,450

Dr.

2,200 2,200

Dr.

30 30

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Office overhead control a/c To general ledger adjustment a/c (Being the actual office overheads brought into costing books) Work-in-progress ledger control a/c To office overhead control a/c (Being the office overheads charged to production) Finished goods control a/c To work-in-progress ledger control a/c (Being the work-in-progress transferred to former a/c Cost of sales a/c To finished goods control a/c (Being the finished stock transferred to former a/c) Costing profit & loss a/c To cost of sales a/c (Being cost of sales transferred to profit & loss a/c) General ledger adjustment a/c To costing profit & loss a/c (Being the amount of sales brought into costing profit & loss a/c) Costing profit & loss a/c To general ledger adjustment a/c (Being the amount of profit) COST LEDGER GENERAL LEDGER ADJUSTMENT A/C To costing P & L a/c To balance c/d 21,000 4,050 By By By By By By

Dr.

1,170 1,170

Dr.

1,200 1,200

Dr.

18,000 18,000

Dr.

20,300 20,300

Dr.

20,300 20,300

Dr.

21,000 21,000

Dr.

700 700

balance b/d stores ledger control a/c wages control a/c factory overhead control a/c office overhead control a/c costing P & L a/c

8,730 5,000 8,000 1,450 1,170 700 25,050

25,050 STORES LEDGER CONTROL ACCOUNT To balance b/d To general ledger adjustment a/c 1,150 5,000 6,150 By WIP ledger control a/c By factory overhead control a/c By balance c/d

4,980 200 970 6,150

NON-INTEGRAL OR COST LEDGER ACCOUNTING SYSTEM

365

WAGES CONTROL ACCOUNT To general ledger adjustment a/c 8,000 8,000 FACTORY OVERHEAD CONTROL ACCOUNT To To To To stores ledger control a/c wages control a/c factory overhead suspense a/c general ledger adjustment a/c 200 500 50 1,450 2,200 OFFICE OVERHEAD CONTROL ACCOUNT To office overhead suspense a/c To general ledger adjustment a/c 30 1,170 1,200 WORK-IN-PROGRESS LEDGER CONTROL ACCOUNT To To To To To balance b/d stores ledger control a/c wages control a/c factory overhead control a/c office overhead control a/c 5,200 4,900 7,500 2,200 1,200 21,080 FINISHED GOODS CONTROL ACCOUNT To balance b/d To WIP ledger control a/c 2,300 18,000 20,300 COST OF SALES ACCOUNT To finished goods control a/c 20,300 By costing P & L a/c 20,300 By cost of sales a/c 20,300 20,300 By finished goods control a/c By balance c/d 18,000 3,080 By WIP ledger control a/c 1,200 1,200 By WIP ledger control a/c 2,200 By WIP ledger control a/c By factory overhead control a/c 7,500 500 8,000

2,200

21,080

COSTING PROFIT & LOSS ACCOUNT To cost of sales a/c To general ledger adjustment a/c (profit) 20,300 700 21,000 TRIAL BALANCE AS ON 31.12.1992 Dr. General ledger control a/c Stores ledger control a/c WIP ledger control a/c 970 3,080 4,050 4,050 Cr. 4,050 21,000 By general ledger adjustment a/c (sales) 21,000

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METHODS AND TECHNIQUES OF COSTING

Problem 8. On 31.3.1989, the following balances were extracted from the books of the Supreme Manufacturing Company: Dr. Cr. Stores ledger control a/c 35,000 WIP control a/c 38,000 Finished goods control a/c 25,000 Cost ledger control a/c 98,000 98,000 The following transactions took place in April 1989: Raw materials: Rs. Purchased 95,000 Returned to suppliers 3,000 Issued to production 98,000 Returned to stores 3,000 Productive wages 40,000 Indirect labour 25,000 Factory overhead expenses incurred 50,000 Selling and administration expenses 40,000 Cost of finished goods transferred to warehouse 2,13,000 Cost of goods sold 2,10,000 Sales 3,00,000 Factory overheads are applied to production at 150% of direct wages and under or over absorbed overhead being carried forward for adjustment in the subsequent months. All administrative and selling expenses are treated as period cost and charged off to the profit and loss a/c of the month in which they are incurred: Show the following accounts. (a) Cost ledger control a/c (b) Stores ledger control a/c (c) WIP control a/c (d) Finished goods stock control a/c (e) Factory overhead control a/c (f) Costing P & L a/c (g) Trial balance as at 30.4.1989 (C.A., Inter, May 1989) Solution: COST LEDGER CONTROL ACCOUNT To costing P & L a/c (sales) To stores ledger control a/c To balance c/d 3,00,000 3,000 95,000 By balance b/d By stores ledger control a/c By wage control a/c (production and indirect) By factory overhead control a/c By selling & adm. overhead By costing P & L a/c 98,000 95,000 65,000 50,000 40,000 50,000 3,98,000 98,000

3,98,000

NON-INTEGRAL OR COST LEDGER ACCOUNTING SYSTEM

367

STORES LEDGER CONTROL ACCOUNT To Balance b/d To cost ledger control a/c To WIP control a/c 35,000 95,000 3,000 1,33,000 WORK-IN-PROGRESS CONTROL ACCOUNT To To To To Balance b/d stores ledger control a/c wages control a/c factory overhead control a/c 38,000 98,000 40,000 60,000 2,36,000 FINISHED GOODS CONTROL ACCOUNT To balance b/d To work-in-progress control a/c 25,000 2,13,000 2,38,000 FACTORY OVERHEAD CONTROL ACCOUNT To wage control a/c (indirect labour) 25,000 To cost ledger control a/c 50,000 75,000 COSTING P & L ACCOUNT To cost of goods sold a/c To selling & adm. overhead To cost ledger control a/c (costing profit) 2,10,000 40,000 50,000 3,00,000 TRIAL BALANCE AS ON 30.4.1989 Stores ledger control a/c Work-in-progress control a/c Finished goods control a/c Factory overhead control a/c General ledger control a/c Dr. 32,000 20,000 28,000 15,000 95,000 Working Notes: WAGES CONTROL ACCOUNT To cost ledger control a/c 65,000 65,000 By WIP control a/c By factory overhead control a/c 40,000 25,000 65,000 Cr. 3,00,000 By cost ledger control a/c 3,00,000 By WIP control a/c By balance c/d 60,000 15,000 75,000 By cost of goods sold a/c By Balance c/d 2,10,000 28,000 2,38,000 By stores ledger control a/c By finished goods a/c By balance c/d 3,000 2,31,000 20,000 2,36,000 By cost ledger control a/c By work-in-progress control a/c By balance c/d 3,000 98,000 32,000 1,33,000

95,000 95,000

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METHODS AND TECHNIQUES OF COSTING

COST OF GOODS SOLD To finished goods control a/c 2,10,000 2,10,000 SELLING AND DISTRIBUTION OVERHEAD To cost ledger control a/c 40,000 By costing P & L a/c 40,000 By costing P & L a/c 2,10,000 2,10,000

Problem 9. The following balances are extracted from Gujarat Chemical Companys cost ledger as on 31st March 1993: Figures in 000 Rs. (Dr.) Rs. (Cr.) Control accounts Raw materials 500 Work-in-progress 230 Finished stock 130 General ledger adjustment a/c 860 860 Further transactions took place during the following quarter as follows: Factory overhead allocated to WIP Goods finished at cost Raw materials purchased Direct wages allocated to work-in-progress Raw materials issued to production Cost of goods sold Raw materials returned to suppliers Sales returns (at cost) Inventory audit raw material shortage Work-in-progress rejected (scrap valuenil) You are required to: (a) Write up the four accounts in the cost ledger (b) Prepare a trial balances as on 31.3.1993 Solution: RAW MATERIALS CONTROL ACCOUNT (RS. 000) To Balance b/d To General ledger adjustment a/c 500 225 By WIP (materials issued) By General ledger adjustment (purchase returns) By General ledger adjustment (stock shortage) By Balance c/d 165 10 12 538 725 Fig. in 000s 120 400 225 80 165 515 10 50 12 18 860

725

NON-INTEGRAL OR COST LEDGER ACCOUNTING SYSTEM

369

WORK-IN-PROGRESS CONTROL ACCOUNT To Balance b/d To General ledger adjustment a/c (factory overhead) To Raw materials control a/c (raw materials) To General ledger adjustment a/c (direct wages) 230 120 165 80 595 FINISHED STOCK CONTROL ACCOUNT To Balance b/d To WIP (completed production) To General ledger adjustment (sales returns) 130 400 30 560 GENERAL LEDGER ADJUSTMENT ACCOUNT To Finished stock control a/c (sales of cost) To raw material control a/c (purchase returns) To raw materials control a/c (stock shortage) To WIP (rejections) To balance c/d 515 10 12 18 760 1,315 TRIAL BALANCE AS ON 31.3.1993 (FIGURES IN 000) Raw materials ledger control a/c Work-in-progress control a/c Finished stock control a/c General ledger adjustment a/c Dr. 538 177 45 760 Cr. By By By By By balance b/d WIP (factory overhead) WIP (direct wages) Raw material control a/c Finished stock control a/c (sales returns) 860 120 80 225 30 1,315 560 By General ledger adjustment a/c (sales at cost) By Balance c/d 515 45 595 By finished stock control a/c By general ledger adjustment a/c (rejections) By balance c/d 400 18 177

760 760

Problem 10. The following balances appear in the books of M.K. Company Ltd. on 1.1.2002: General ledger adjustment a/c 15,200 Stores ledger control a/c 8,750 WIP ledger control a/c 4,280 Finished goods ledger control a/c 2,170 15,200 On 31.12.2002, the following information was supplied: Purchase of stores Purchase for special job Direct wages 15,200 60,640 1,950 38,627

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METHODS AND TECHNIQUES OF COSTING

Indirect factory wages Administrative salaries Selling and distribution salaries

9,543 6,731 4,252

59,153

Production expenses 10,432 Administration expenses 9,546 Selling and distribution expenses 6,430 Stores issued to production 56,501 Stores issued to maintenance a/c 2,556 Returns to suppliers 312 Production overhead absorbed by production 23,410 Administration overhead absorbed by finished goods 15,150 Selling overhead recovered on sales 9,515 Products finished during the year 1,18,517 Finished goods sold at cost 1,33,382 Sales 1,55,000 You are required to record the entries in cost ledger for the year 2002 and prepare a trial balance. Solution: COST LEDGER GENERAL LEDGER ADJUSTMENT ACCOUNT To stores ledger control a/c (returns) 312 To P & L a/c (sales) 1,55,000 To balance c/d 18,697 By balance b/d By stores ledger control a/c purchases By WIP control a/c (special purchases) By wages control a/c By production overhead a/c By administration overhead a/c By selling overhead a/c By costing P & L a/c 15,200 60,640 1,950 59,153 10,432 9,546 6,430 10,658 1,74,009

1,74,009 STORES LEDGER CONTROL ACCOUNT To Balance b/d To General ledger adjustment a/c 8,750 60,640 By By By By work-in-progress control a/c production overhead a/c General ledger adjustment a/c Balance c/d

56,501 2,586 312 9,991 69,390

69,390 WAGES CONTROL ACCOUNT To General ledger adjustment a/c 59,513 By By By By WIP control a/c production overhead a/c Administration overhead a/c selling & distribution overhead a/c

38,627 9,543 6,731 4,252 59,513

59,513

NON-INTEGRAL OR COST LEDGER ACCOUNTING SYSTEM

371

PRODUCTION OVERHEAD ACCOUNT To To To To general ledger adjustment a/c stores ledger control a/c wages control a/c overhead adjustment a/c 10,432 2,586 9,543 849 23,410 WIP LEDGER CONTROL ACCOUNT To To To To To balance b/d General ledger adjustment a/c stores ledger control a/c wages control a/c production overhead a/c 4,280 1,950 56,501 38,627 23,410 1,24,768 ADMINISTRATION OVERHEAD ACCOUNT To General ledger adjustment a/c To wages control a/c 9,546 6,731 16,277 SELLING AND DISTRIBUTION OVERHEAD ACCOUNT To General ledger adjustment a/c To wages control a/c 6,430 4,252 10,682 FINISHED GOODS LEDGER CONTROL ACCOUNT To To To To Balance b/d administration overhead a/c WIP control a/c wages control a/c 2,170 15,150 1,18,517 6,731 1,35,837 COST OF SALES ACCOUNT To selling and distribution overhead a/c 9,515 To finished goods ledger control a/c 1,33,382 1,42,897 OVERHEAD ADJUSTMENT ACCOUNT To administration overhead a/c To selling and distribution overhead a/c 1,127 1,167 2,294 2,294 By production overhead a/c By costing P & L a/c 849 1,445 By P & L a/c 1,42,897 By cost of sales a/c By Balance c/d 1,33,382 2,455 By cost of sales a/c By overhead adjustment a/c 9,515 1,167 10,682 By Finished goods ledger control a/c To overhead adjustment a/c 15,150 1,127 16,277 By Finished goods ledger control a/c By Balance c/d 1,18,517 6,251 By WIP control a/c 23,410

23,410

1,24,768

1,35,837

1,42,897

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METHODS AND TECHNIQUES OF COSTING

COSTING P & L ACCOUNT To cost of sales a/c 1,42,897 To overhead adjustment a/c 1,445 To General ledger adjustment a/c net profit 10,658 1,55,000 TRIAL BALANCE Stores ledger control a/c Work-in-progress control a/c Finished goods ledger control a/c General ledger adjustment a/c Dr. 9,991 6,251 2,455 Cr. By sales 1,55,000

1,55,000

18,697 18,697 18,697

Problem 11. A firm maintains its books under non-integral accounting system. Enter the following transactions in the cost books: Rs. (i) Credit purchase for a special job 30,000 (ii) Returned to suppliers 5,000 (iii) Materials returned from jobs to stores 500 (iv) Direct materials issued to jobs 10,000 (Osmania University, M.Com., Final, June 2003) Solution: COST JOURNAL (i) Work-in-progress control a/c To general ledger control a/c (Being credit purchase for a special job) (ii) General ledger control a/c To work-in-progress control (Being materials returned to suppliers) (iii) Stores ledger control a/c To work-in-progress control a/c (Being materials returned from jobs to stores) (iv) Work-in-progress control a/c To stores ledger control a/c (Being direct material issued to jobs) Dr. 30,000 30,000 Dr. 5,000 5,000 Dr. 500 500 Dr. 10,000 10,000

Problem 12. Give journal entries for entering the following transactions in the non-integrated accounting system in the cost records. (a) Purchase of raw materials on credit Rs. 10,000 (b) Depreciation on machinery used for production Rs. 2,000 (c) Absorption of production overhead Rs. 6,000 (d) Cash period for indirect production wages Rs. 1,000 (Osmania University, M.Com., Final, May 1997)

NON-INTEGRAL OR COST LEDGER ACCOUNTING SYSTEM

373

Solution: COST JOURNAL (1) Stores ledger control a/c To general ledger adjustment a/c (Being raw materials purchased) (2) Factory overhead control a/c To general ledger adjustment a/c (Being depreciation on machinery) (3) Work-in-progress control a/c To factory overhead control a/c (Being absorption of production overhead) (4) Wages control a/c To General ledger adjustment a/c (Being cash paid to indirect production wages) Dr. 10,000 10,000 Dr. 2,000 2,000 Dr. 6,000 6,000 Dr. 1,000 1,000

Problem 13. R.K. Ltd., operates separate cost accounting and financial accounting systems. The following information has been extracted from the cost records of the company for the month of January 2005. . (A) Control account balance 1-1-05 31-1-05 Rs. Rs. Raw material 49,500 50,300 Work-in-progress 60,100 56,900 Finished goods 1,15,400 1,37,400 (B) Additional information for the month: Raw materials purchased Production overhead incurred Production overhead absorbed (185% of direct wages) Factory cost of goods produced Cost of goods sold (Excluding selling and Administration overhead) Selling and Administration overhead incurred and absorbed Sales Loss of materials damaged by flood 1,08,000 91,600 74,000 2,22,000 2,00,000 30,000 3,00,000 2,400

You are required to: (i) Prepare the following control accounts in the cost ledger: (a) Raw material (b) Work-in-progress (c) Finished goods (d) Production overhead (ii) Ascertain profit as per cost accounts for the month of January 2005 assuming that under or over absorbed overhead is written off to costing profit and loss account. (University of Delhi, B.Com. (Hons) 2005)

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METHODS AND TECHNIQUES OF COSTING

Solution: RAW MATERIAL CONTROL ACCOUNT To balance b/d To cost ledger control a/c 49,500 1,08,000 1,57,500 WORK-IN-PROGRESS CONTROL ACCOUNT To Balance b/d To stores ledger control a/c To wage control a/c (W.N-1) To production overhead control a/c 60,100 1,04,800 40,000 74,000 2,78,900 Working Note: Wage control = 74,000
 = Rs. 40,000 

By costing P & L a/c By work-in-progress control a/c By Balance c/d

2,400 1,04,800 50,300 1,57,500

By finished goods control a/c By Balance c/d

2,22,000 56,900

2,78,900

FINISHED GOODS CONTROL ACCOUNT To balance b/d To work-in-progress control a/c 1,15,400 2,22,000 3,37,400 PRODUCTION OVERHEAD CONTROL ACCOUNT To cost ledger adj. a/c 91,600 91,600 COSTING PROFIT & LOSS ACCOUNT To To To To To cost of goods sold 2,00,000 Abnormal loss 2,400 production overhead under absorbed 17,600 selling & administration overhead 30,000 profit 50,000 3,00,000 unit: Opening balance Purchase of material Transfer from work-in-progress Issues to work-in-progress Issues to repair and maintenance Deficiencies found in stock taking Work-in-progress: opening balance Stores: Rs. 32,000 1,58,000 80,000 1,60,000 20,000 6,000 60,000 By sales 3,00,000 By work-in-progress control a/c By profit & loss a/c 74,000 17,600 91,600 By cost of goods sold By balance c/d 2,00,000 1,37,400 3,37,400

3,00,000

Problem 14. The following figures have been extracted from the cost records of a manufacturing

NON-INTEGRAL OR COST LEDGER ACCOUNTING SYSTEM

375

Direct wages applied 65,000 Overhead applied 2,40,000 Closing balance of WIP 45,000 Finished product; Entire output is sold at a profit of 10% on actual cost from work-in-progress. Wages incurred Rs. 70,000, overhead incurred Rs. 2,50,000. Items not included in cost records: Income from investment Rs. 10,000. Loss on sale of capital assets Rs. 20,000. Draw up stores control account, work-in-progress control account, costing profit and loss account and reconciliation statement. (C.A. PE-II, Group II, May 2005) Solution: IN COSTING BOOKS STORES CONTROL ACCOUNT To balance b/d To General ledger adjustment a/c To work-in-progress control a/c 32,000 1,58,000 80,000 2,70,000 WIP CONTROL ACCOUNT To To To To Balance b/d stores control a/c Direct wages control a/c works overhead control a/c 60,000 1,60,000 65,000 2,40,000 5,25,000 WORKS OVERHEAD CONTROL ACCOUNT To general ledger adjustment a/c To stores ledger control a/c 2,50,000 20,000 2,70,000 COSTING P & L ACCOUNT To To To To WIP control a/c (cost of sales) works overhead control a/c stores control a/c (shortage) profit 4,00,000 30,000 6,000 4,000 4,40,000 By general ledger adjustment a/c: Cost of sales 4,00,000 Profit 10% 40,000 4,40,000 4,40,000 By WIP control a/c By costing P & L a/c (under recovery) 2,40,000 30,000 2,70,000 By stores control a/c 80,000 By costing P&L a/c (cost of sales) 4,00,000 To balance c/d 45,000 5,25,000 By By By By WIP control a/c works overhead control a/c costing P & L a/c balance c/d 1,60,000 20,000 6,000 84,000 2,70,000

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METHODS AND TECHNIQUES OF COSTING

IN FINANCIAL BOOKS PROFIT & LOSS ACCOUNT To opening stock: Stores 32,000 WIP 60,000 92,000 To purchases 1,58,000 To wages 70,000 To overhead 2,50,000 To loss on sale of capital assets 20,000 5,90,000 RECONCILIATION STATEMENT Profit as per cost accounts Add: Income from investment recorded in financial accounts Less: Under absorption of wages in cost accounts Loss on sale of capital asset included in financial at accounts only Loss as per financial accounts 4,000 10,000 14,000 5,000 By sales By closing stock: Stores WIP 4,40,000 84,000 45,000

1,29,000 10,000 11,000 5,90,000

By income from investment By loss

20,000 25,000 11,000

Problem 15. A company operates separate cost accounting and financial accounting systems. The following is the list of opening balances as on 1-4-2001 in the cost ledger Debit Credit Rs. Rs. Stores ledger control a/c 53,375 WIP control account 104,595 Finished goods control a/c 30,780 General ledger adjustment a/c 1,88,750 Transactions for the quarter ended 30-6-2001 are as under: Rs. Materials purchased 26,700 Materials issued to production 40,000 Materials issued for factory repairs 900 Factory wages paid (including indirect wages Rs. 23,000) 77,500 Production overhead incurred 95,200 Production overheads under-absorbed and written off 3,200 Sales 2,56,000 The companys gross profit is 25% on factory cost. At the end of the quarter, work-in-progress stocks increased by Rs. 7,500. Prepare the relevant control accounts, costing profit & loss a/c, and General ledger adjustment account to record the above transactions for the quarter ended 30-6-2001. (C.A. Inter, November 2001)

NON-INTEGRAL OR COST LEDGER ACCOUNTING SYSTEM

377

Solution: GENERAL LEDGER ADJUSTMENT ACCOUNT To sales To balance c/d 2,56,000 1,80,150 By By By By By Balance b/d stores ledger control a/c wages control a/c overhead control a/c costing profit & loss a/c 1,88,750 26,700 77,500 95,200 48,000 4,36,150

4,36,150 STORES LEDGER CONTROL ACCOUNT To Balance b/d To General ledger adjustment a/c 53,375 26,700 80,075 WIP CONTROL ACCOUNT To To To To Balance b/d stores ledger control a/c wages control a/c Factory overhead control 1,04,595 40,000 54,500 1,15,900 3,14,995 FINISHED GOODS CONTROL ACCOUNT To Balance b/d To WIP control a/c 30,780 2,02,900 2,33,680 Note: Gross profit is 25% on factory cost or 20% on sales Hence cost of sales = Rs. 2,56,000 20% of 2,56,000 = Rs. 2,04,800 FACTORY OVERHEAD CONTROL ACCOUNT To stores ledger control a/c To wages control a/c To general ledger adjustment a/c 900 23,000 95,200 1,19,100 COST OF SALES ACCOUNT To finished goods control a/c 2,04,800 By costing P & L a/c By costing P & L a/c By WIP control a/c By cost sales a/c By balance c/d By Finished goods control a/c By Balance c/d By WIP control a/c By Factory overhead control a/c By Balance c/d

40,000 900 39,175 80,075

2,02,900 1,12,095

3,14,995

2,04,800 28,880 2,33,680

3,200 1,15,900 1,19,100

2,04,800

SALES ACCOUNT To costing P & L a/c 2,56,000 By General ledger adjustment a/c 2,56,000

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METHODS AND TECHNIQUES OF COSTING

WAGES CONTROL ACCOUNT To general ledger adjustment a/c 77,500 77,500 COSTING PROFIT AND LOSS ACCOUNT To factory overhead control a/c 3,200 To cost of sales a/c 2,04,800 To General ledger adjustment a/c profit 48,000 2,56,000 TRIAL BALANCE AS ON 30-6-2001 Stores ledger control a/c WIP control a/c Finished goods control a/c General ledger adjustment a/c Dr. 39,175 1,12,095 28,880 1,80,150 Cr. By sales a/c 2,56,000 By factory overhead control a/c By WIP control a/c 23,000 54,500 77,500

2,56,000

1,80,150 1,80,150

Questions Questions
1. The following are the balances in the cost ledger of a manufacturing company on Ist January 1981: Dr. Stores ledger Work-in-progress ledger Finished goods ledger Financial ledger Summary of transactions during the year 1981: Materials purchased Materials issued to jobs Materials issued for repairs in a factory Direct wages paid Indirect wages paid Factory expenses paid Administration expenses paid Selling expenses paid Cost of finished goods produced Cost of finished goods sold Sales 4,500 10,200 6,800 21,500 20,000 18,000 1,000 15,000 5,000 6,000 15,000 7,000 56,000 70,000 1,00,000 Cr.

NON-INTEGRAL OR COST LEDGER ACCOUNTING SYSTEM

379

Prepare control accounts and costing profit and loss account in the cost ledger assuming that the overheads recovered and incurred are the same and that administration overheads are charged to finished goods. (Madurai University, M.Com., Nov. 1988) [Ans. Costing profit is Rs. 23,800] 2. Hewlett and Packard company maintains cost control accounts. The following balances have been extracted from the books: Dr. Rs. Cost ledger control Stores ledger control Work-in-progress ledger control Finished goods control 20,000 10,000 30,000 Cr. Rs. 60,000

60,000 60,000 Following transactions are recorded for the period: Materials supplied to stores 1,00,000 Materials supplied directly to production 30,000 Materials returned from stores to supplier 50,000 Materials issued to production 70,000 Indirect materials 10,000 Wages and salaries (Direct wages Rs. 80,000, factory wages Rs. 10,000, administrative salary Rs. 40,000, marketing salary Rs. 20,000) 1,50,000 Production overhead incurred 60,000 Factory overhead recovered at 90% of direct wages Administrative expenses 40,000 Office overhead absorbed 85,000 Marketing expenses 28,000 Marketing expenses recovered at Re. 1 per unit sold Cost of production 25,000 Cost of goods sold 3,20,000 Sales at Rs. 10 per unit 4,00,000 Prepare necessary ledger accounts in cost ledger and extract trial balance as on the last date of period. (Bangalore University, M. Com., April 1999) [Ans. Balances: Cost ledger control Rs. 92,000, Stores ledger control Rs. 35,000, WIP ledger control Rs. 12,000, Finished goods control Rs. 45,000, Net profit Rs. 29,000]

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