lassification of Costs and Cost Sheets

57
Direct Wages in Cost Sheet
Direct Expenses in Cost Sheet [Ans.: Para 2.9.1]
.Works Overhead in Cost Sheet [Ans.: Para 2.9.1]
Valuation of Stock in Cost Sheet [Ans.: Para 2.9.1]
2. Treatment of Scrap in Cost Sheet [Ans.: Para 2.9.1]
3. Packing Material Cost in Cost Sheet [Ans.: Para 2.9.1]
4. Profit Centre [Ans.: Para 2.9.5]
5. Investment Centre [Ans.: Para 2.6]
[Ans.: Para 2.7]
6.Different Cost Sheets for Different Purposes [Ans.: Para 2.8]
5. OBJECTIVE QUESTIONS

5.1 MULTIPLE CHOICE QUESTIONSS

. Conceptual
Form of specific order costing where work is undertaken to customer's
each order is comparatively of short duration. special requirements and
ay Job Order Costing
(b) Batch Costing
(c) Contract Costing
(d) Process Costing
. Form of specific order costing which
consists of a group of similar articles which maintain its
identity throughout one or more
stages of production.
(a) Job Order Costing b) Batch Costing
KYContract Costing (d) Process Costing
3. Which of the following items is not included in preparation of a cost sheet?
(a) Cariage inward (b) Purchase returns
(c) Sales commission
d) Interest paid
.Which of the following items is not excluded while preparing a cost sheet?
(a) Goodwill written off (b) Provision for taxation
(¢) Property tax on Factory Building (d) Transfer to reserves
Which of the following are direct
expenses?
() The cost of special designs,
drawing or layouts
(i) The hire of tools or equipment for a
particular job
(i) Salesman's wages
(iv) Rent
rates and insurance of a factoryy
Jaty and (i) (b) (i) and (ii)
Pa (c)i) and (iv) d ) (ii) and (iv)
. A company has to pay 10,000 per unit royalty tothe
and sells. The royalty charge would be classified as designer
of a product which it manufactures
xh a
(a Direct expense (6) Production overhead
t Administrative overhead dy Selling overhead
aWherever part of the manufacturing operation is subcontracted, the subcontract
he
to materials shall be charges related
(a) ignored (b) treated as cost of materials
(c) treated as works overheads e treated as direct expenses
Research and development cost relating to an
existing product
a) shall be treated as Capital Expenditure
(b) shall be treated as deferred revenue
expenditure
(c) shall be treated as Direct
Expenses
(d) shall be ignored
p. Which of the following are
prime costs?
() Direct materials ii) Direct labour
i ) Indirect labour (iv) Indirect expenses
g a i) and (i) (b) (0) and (ii)
(c) (i) and (ii) (d) (i) and (iv)
 indirect costs only
Total '
(b) costs
pime
co0st
(d) Total production
10 What
1s

Total
direct
costs only
costs pnme
cost
for a
manufactr
ng compar
(a) ihe premises

a r e part of
non-production
suppliers

(c) lotal following

costs
m a t e r i a l s
from
the
m a i n t e n a n c e

the
Wheh of
machine
raw
11 transporting in
engaged c u s t o m e r s

of to
fa) Cost workers
deliveries

of factory used for

(b) Wages of l o r i e s inaterials
Depreciation

(c) indirect
production

of
(d) Cost a
product
cost is m a n u f a c t u r i n g

12. Prune n
all
a)
costs

total
incurred

of direct
costs (d) the
cost

?
of oper
departme .
(b) the product cost
cost of a of prime
material component (b) Direct labour
(c) the following
is not
a
Which of the jey Overhead
1.3
(a) Direct materials

(c) Direct expenses

units of output
refersto
tem "prine cost" to produce material costs
14. The costs
incurred
labor and
raw
manufacturing direct
(a) all than
costs other
manufacturing labor costs
(b) all purchased
and direct
costs
material
direct labor (a
(c)raw material
used and
raw except (C
-(d)the consist of allthe following (b) Factory utilities
15.Ovesheads F
(d) Indirect labour
( a Indirect materials CC

(c) Direct labour p

16. Recruitment costs
(b) shall form part of Works cost a
of Prime Cost be ignored C
(a) shall form part Overheads
of
(d)shall stock for M
form part and closing
(c) shall m a n u f a c t u r e d will
include opening
in
17.Cost of goods work in progress only
materials and materials only
(a) raw (c) raw a
only
(b) work in progress and finished goods
work in progress, tor despatch of the goods
(d) raw materials, from sale of empty containers used
Income
18. In the cost sheet, Ra
shall be cost of production
production (b deducted from Di
(a) added to cost of fd) ignored
(c) added to sales accident shall be Be
cost sheet, abnormal costs e.g. due to
19. In the of production Co
(b) deducted from cost
(a) added to cost of production W
deducted from sales
(dy ignored (a
(c)
20.Direct materials + Direct labour +Direct expenses =.

(C
(b) Cost of production
(a) Works cost R
(c) Cost of sales (o)Primecost ra
ma
Overhead
21. Prime cost + Factory =.

(a) Fixed Cost (b) Works cost (a

(c) Cost of production (d) Cost of goods sold (C
22.Prime cost+Factory overhead + Administration overhead =. M
(a) Works cost (b)Cost of production
(c) Prime Cost Td) Cost of sales
23.Total cost Selling and distribution overheads = . .
(a) Cost of goods sold (b) Closing stock
(c) eost of production (d) Net profit Co
24. Cost of production Administration overheads = , an
(a) Prime Cost (b) Cost of sales
CT Works cost C
(d) Work-in-progress
25. Prime cost+Overheads = .
(a) Works cost
(b) Total cost
(c) Cost of sales
(d) Cost of production
lassification of Costs and Cost Sheets 59
26.Total cost+ Profit=
a) Selling price (b) Cost of goods sold
(c) Selling and distribution overheads (d) Gross Profit
Numerical (Internal Tests)
7.From the following details, compute cost of goods manufactured Cost of goods sold 2,00,000;
Opening stock of finished goods ? 50,000; Closing stock of finished goods 1,00,000 and Closing
stock of work-in-progress 10,000.
(a) 2,00,000 b) 7 2,50,000
(c) 2,40,000 (d)R 3,00,000
8.The opening stock of finished goods is 50,000; closing stock of finished goods is 1,00,000
and the cost of goods manufactured is 2,00,000. What is cost of goods sold ?
(a) 2,00,000 (b) 2,50,000
(c) 1,00,000 dy 1,50,000
9.Vinayaka Ltd. furnishes the following information for a period, pertaining to its product"T
Cost of production (for 11,000 units) 44,000
Selling expenses (per unit) T0.40
Sales (for 9,000 units) T 54,000
The profit per unit of the product was
(a) 1.15 (b) 1.20
(c) R 2.60 ey1.60
0. For product A of Shilpa Ltd., the prime cost is 20 per unit, factory overheads are 20% of prime
cost and administration overheads are 25% of Works cost. If the company desires to earn a
profiof 25% on seling price, the selling price per unit of product A would be
Aa) T 40 (b) T 33
(c) 90 (d) 30
1. M& Co. used in a particular year 3,00,000 of direct materials. The year-end direct material
inventory was 50,000 more than it was at the beginning of the year. Calculate direct material
purchases.
(a)300,000 (b) F 2,50,000
o3,50,000 (d) 4,00,000
2.Consider the following:
Raw material used R 1,40,000
Direct labour
5,00,000
Total manufacturing overhead
6,00,000
Beginning work-in-progress 15,000
Cost of goods sold
12,05,000
What is the value of the closing work-in-progress?
(a) 65,00o (b) 35,000
(CF 50,000 (d) 70,000
3. R Company manufactures desks. The beginning balance of Raw Material Inventory was 4,500
raw material purchases of 7 29,600 were made
during the month. At month end, 7 7,700 of raw
materlal was on hand. Raw material used during the month was
a) 26,400 (b) 34,100
(c) F 37,30o (d) 29,600
4. M Company manufactures tables. If raw material used was ? 80,000 and Raw Material
at the beginning and end of Inventory
the period, respectively, was 17,000 and R 21,000, what was the
amount of raw material purchased?
(a) 76,000 (b) 1,18,000
(c84,000 (d)1,01,000
.T Company manufactures
computer stands. What is the opening stock of Finished Goods if
Cost of Goods Sold is 1,07,000; the ending balance of Finished Goods Inventory is ? 20,000;
and Cost of Goods Manufactured is 50,000 less than Cost of Goods Sold?
(ay 70,000 (b) 77,000
(c) 1,57,000 (d) 1,27,000
60 SN.B.A
FILL IN THEBLANKS bsorbed in
abs
production
5.2
1. The variable producton
overheads
shall
be

(shall shall
Abasedon
not) for ssification
transpot
normal) capacty levied by
charges
pan .
CC
C. Any
demurrage

materials to any
materialshall
be.
(added to l
ted Tra
with respect
3.Subsidy
recewable
(shall/ shall not) form part of the 2 St
materials.

ofprimary
packing
materials.

shall
form part
of.
(works distribie 3
To
4, Cost
materials

(includes/excludes) cost of procureme freig

6
5. Cost of
secondary

Material c o s t -
packing

to the
acquisition. inwards, A 5
6. Ac
of m o .
etc. directly
attributable

drawbacks,
rerunds on
account
odvat, cenv
etermining the
7 Br
duty (added/deducted) in dete
insurance

discounts,
rebates,
sts of rmate
7. Trade and wages paid to
tye
emporatny
are. salaries
similar items
other
wages paid totoeemployees
(includes/excludes)

salaries
and wages paid
1
-

8. Labour cost (includes/excludes)

8,000
finished Goods
9. Labourcost Closing
Stock of
sales. Sales a
ODen 2.
on
15,000 units,
257%
Profit @
15 perunit,
Production
10.
units, Cost of Sales@ units, and
2,200
Cosing Stock 2,200 units,Se 4. G-
2,40,000, Opening
Stock200 . E
11. Sales
units produced. Direct Expense
unit. The number of ? 2,90,000, 7 000, C 6.
Labour Cost
Direct 7. FI
4,77,000,
12.Prime Cost
consumed is - Direct Expenses
materials Cost 45,000, O0. Dne
Direct Material
72,000,
13.Prime Cost
Cost is Prime Cost is
Overheads 7 8,000. 1.
7 80,000, Factory
14.Work Cost Cost 7 17,500 being 175% of works Overheads. Factory overh. a
Br
15.Direct Labour & Administrative Overheads C
2,00,000, Office
16.Cost of Goods produced 4.
Works cost is -
25% of Work Cost. Cost ofa .
& Adm. Overheads
Cost 1,00,000, Office
17.Works 6.
25% of Work Cost. Cost of
1,00,000 being
aona

18.Office & Adm. Overheads 8.

Sales. Cost of Sales are .
19.Sales 1,20,000, Profit 20% on

cost. Cost of Sales are R

20.Sales 1,20,000, Profit20% on
Sales. Profit is
21.Cost of Sales 1,20,000, Profit 20%
on

Cost. Profit is .
22.Sales1,20,000,Profit20% on
23.Cost of Sales 7 1,20,000, Profit 20% on Sales. Sales amount to -

24. Profit @ 20% on Cost amounted to 20,000. Sales amount to R

5.3 MATCH THE FOLLOWING

5.
AJ COLUMN A (Method) COLUMN B (Applicable
Job costing (a) Where Job is large and execue6.
2 Batch Costing (not in-house)
3. Contract Costing (b) Ascertainment of Costs incas
4. Single or Output Costing services are rendered
5. Process Costing The cost of production at ear
(c) .
6. Operating Costing 2
ascertained separately
7. Multiple Costing (d) Where all costs can be direci
to a specific job 3.

(e) Combination of two or more

of costing
() Where all costs can be direc
to a group of products
singe
(9) Cost ascertainment 1or a
 CJassification of Costs and Cost Shewes 61

cOLUMNA (Industry) COLUMN B (Costing Method)

Transport
(a) Unit Costing
Steel
(b) Job Costing
3. Coal
(C) Multiple Costing
4. Toy-making (d)
5 T.V. Operating Costing
(e) Contract Costing
6 Advertising9 (1) Process Costing
Bridge Construction Batch Costing
(g)
sale COLUMNA(lndustry)
ternal CI COLUMN B (Cost Unit)
emp
he tm
1
2
Automobile
Cement
(a) Kilometres
(b) Cubic Metres
Petroleumn
Soc 3
4. Gas
(c) Tonnes
(d) Numbers
Price 6.
Electricity
Transport
(e) Litres
() Sacks
Cost 7. Flour
(g) Kilowatts

Drec D COLUMN A (Industry)

COLUMNB (Cost Unit)
1. Liquor
(a) Pairs
2. Bricks
are (b) Barrels
3 Cloth
(c) Ream
Wotks 4. Carpets (d) Bales
5 Pencils
s produ (e) Square feet
6. Cotton ) Metres
7. Timber
(g) 1,000 No.
produ 8. Shoes
(h) Cubic feet
9. Paper () Gross

E] COLUMNA COLUMNB
1. Temporary labour employed to (a) Administration overheads
increase production (b) Costing Profit & Loss items
2. Uniforms of sanitary workers C) Distribution overheads
3 Salary of the accountant (d) Prime cost
4. Consutation fee of advertisement Selling overheads
e)
designer ) Factory overheads
. Rent of godown for storing finished
goods
Cutedo 5. Loss due to accidental falling of the
roof of a section of the factory
ases
COLUMNA COLUMNB
achs
Freight on purchase of raw material (a) Selling overheads
2. Raw Material, Godown, Chowkidar (b) Prime cost
ctly ch
salary c) Factory overheads
3. Remuneration for legal advice (d) Costing Profit & Loss items
metho 4. Secondary packing with the name of (e) Administration overheads
the company () Distribution overheads
ctlycs 5. Packing of boxes of finished product
in wooden crates for transportation
gle
pn 6. Dividends received on investments
 COLUMN B

62 Prime cost
(a) sification of Costs ar=
COLUMNA
n
which
(b)
Selling overheads
of bags Factory overheads
from
sale
(c) Profit & coLUMN A
Costing LOss
p r o c u r e d

h c o m e

1. (d)
tem
were
raw

Primary Pack
m a t e r a l s

storing
(e) Administi overhe
raw
for

Rem of
godown
Captive Powe
product
2. the Cash Discoui
matenals
keep 3.
to
Primary
packing
4. Scrap value
3 Finished Out
crisp Cost of Free
Bad debts
4. stolen
materials

COLUMN B Products DIs

Cost of
5. Depreciatior
Costing Profit & LOss for Office
COLUMNA
(a) Prime cost items
[H Carriage Inward dies
(b) Selling overheads COLUMN
patterns
and
(c)
Depreciation
of
for
appearing (d) Factory overheads Direct mate
2 lawyer
Amount
paid to
Tribunal
(e) Administration overheads 2.
Direct labo
Labour
as a Direct expe
before a s a l e s m a n
3.
Commission
paid to 4. F i n a n c e cc

of sale price
4. Research
percentage
for 5.
c u s t o m e r s

m a d e to Selling an
Allowance

5. of goods Administra
deliveries
late COLUMN B
3. Indirectp
cOLUMN A Not shown in cost sheet but
R a w - m a t e r i a l s
(a) Profit & Loss Account
Abnormal
Loss of

of
Finished Output Treated as Direct Expense
Abnormal
Loss
Lossof
(b) STATE N
Not shown in cost sheet but
Scrap value of Abnormal (c)
Raw-materials
Profit&Loss Account Factory Cost
= F

rectification of Normal Deducted from the cost ofmaPrime Cost Di

4. Cost of (d) Total Cost = Pri
defective output purchased
of Abnormal
as Direct Expenses Cost of Product
rectification Treated
5. Cost of (e) of Sales
defective output () Treated as part of Selling &nost
losing stock o
Idle Time in factory
6. Cost of Normal Expenses Closing stock a
units produced Added to the Cost of Matenas 3elling and dis
Royalty on
7.
on units sold
(g)
8. Royalty Purchased Selling and dis=
Insurance of Raw-material
9. Added to Factory Cost rime cost is t
casting taken (h)
10. Special Moulds for Deducted from the cost of gooProduction cos
on hire
(i) rimary packa
produced
pa
Treated as part of factory expeSecondary
-The combinec
Administratios
COLUMNB Raw maternai
COLUMNA

value of Normal Loss of (a) Not shown in cost sheet butdkOverheads

1. Scrap Cost of prod-
Raw-materials Profif&LossAccount ExpeAbnormal Le
value of Normal Loss of (b) Treated as part of Factory
2. Scrap of gocdn
Cost
She
Finished Output (C) Deducted from the cost overheads.
In a Cost S
3 Cash Discount Received produced
4 Cost of Abnormal ldle Time in factory (d) Treated as Direct Expenses Cost.
butin a Cost S
5. Hire of Special Tools (e) Not shown in cost sheet Works Cos
6. Drawing Office Expenses Profit&Loss Account Cost
7. Secondary Packing Materials part of Selling
Exo*in a

() reated as # Sales.
Consumed Treated a s part of
Distribution

In a Cost
(9)
8. Estimating Expenses of Tender (h) Deducted from the cost o produced

Anterest is
purchasedd
mecost
lassification of Costs and Cost Sheets
ing overheads 63
ctory overheads COLUMNNA COLUMN B
sing Profit &Loss
tems
min1stration overheads 1 Primary Packing Materials Consumed (a) Not shown in cost sheet but debited to
ads Captive Power Plant Expenses Profit &Loss Account
3 Cash Discount Allowed
(b) Foms part of Office & Adm. Expenses
4. Scrap value of Abnormal Loss of (c) Forms part of seiling expenses
Finished Output (d) Treated as part of Factory Expenses
Cost of Free Samples of (e) Treated as Direct Expenses
UMN B Products Distributed ) Not shown in cost sheet but credited
Depreciation on Computer purchased
to
Profit& Loss Account
ing Profit & Loss for Ofice
cost
items
g overheads COLUMNA cOLUMNB
ory overheads 1. Direct materials (a) Interest on bank overdraft
nistration overheads 2. Direct labour (b) Maintenance contract for office photo
3. Direct expenses copying machine
4. Finance cost (c) Developing new product in laboratary
. Research and development expenses (d) Carriage on purchase of raw materials
6. Selling and distribution cost (e) Royalty paid on number of units of a
7. Administration cost particular product produced
MN B
8. Indirect production costs
( Road licences for delivery vehicles
own in cost sheet
but cre
(g)Lubricants for machine
&Loss Account (h) Wages of machine operators in factory
d as Direct Expense
own in cost sheet 5.4 STATE WHETHER TRUEOR FALSE
but det Factory Cost = Prime Cost + Office overheads
Loss Account
ed from the cost of
mater
Prime Cost = Direct Cost

sed Total Cost = Prime Cost + All Indirect Costs

Cost of Production = Factory Cost + Selling & Distribution Overheads
as Direct Expenses
Cost of Sales = Factory Cost+ Selling & Distribution Overheads
as part oT &
Seling Dist, Closing stock of work-in-progress should be valued on the basis of
prime cost.
Closing stock of finished goods should be valued on the basis of cost of sales.
o the Cost of Materials Seling and distribution overheads areincured on the cost of production of goods produced.
ed Selling and distribution overheads are recovered on the basis of percentage to cost of productton
o Factory Cost 0. Prime cost is the total of direct materials, direct wages and production overheads.
d from the cost of goods 1. Production cost includes only direct costs related to the production.
2. Primary packaging cost is included in distribution cost.

expense. >econdary packaging cost is not production but distribution cost.

as part of factory 4. The combined total of labor and overhead is called prime cost.
5. Administration cost is not included in the cost of work-in-progress.
B 6. Raw material inventory consists of products partially completed at the end of a period.
debt.Overheads include only fixed cost.
nin cost sheet but
8. Cost of production is equal to prime cost plus works cost.
0SS Account Abnormal Loss of Material is treated as part of material cost.
s part of actory Expens
d0.In Cost Sheet, net realizable value of normal scrap of direct materials is deducted trom factory
of goods
from the cost overheads.
1. In a Cost Sheet. Stocks of Work in-progress are adjusted with Works Cost to armve at Ofice
s Direct Expenses Cost.
2. In a Cost Sheet, Stocks of Finished Goods are adjusted with Gross Works Cost to arnve at net
in cost sheet but Cro
Works Cost.
Dss Account In a Cost
Sheet, Seling & Distribution Overheads are added to Factory Cost to
arrwe at Cost of
sallina Exper>3. Sales.
nat ofSell
Ee
Distribution of units
part of atel4. In
matene
Cost Sheet total Selling& DIstribution Overheads are divided by the total number
a

from hecostof produced to arrive at Selling& Distribution Overheads per unt

5. Interest is shown in the cost sheet.
 5.5 CHECK YOUR ANSWERS
5.1 31 (C
26. (a)
21. (b)
1 (a) 6 11 (a) 16. (C) 27. (b) 32. (c
(a) 22 (b)
2 (b) 12 (b) 17. (a) 28 (d) 33 a
7 (d) 23. (c)
3 (d) 8. (c) 13 (d) 18. (b) (d) 34 (c
19. (d) 24. (c) 29 35 a)
4 (c) 9 (a) 14 (d) 30. (a)
20. (d) 25 (b)
5 (a) 10 (a) 15. (c)

Hints
29.16 (4.00 + 0.40)]
30.[(20+ 4+6) 10]
32.[1,40.000 5.00.000 +6.00,000 + 15,000 12.05,000)
33.[4,500+ 29,600 -7,700]
34.[80,000 -17.000 +21,000]
35.[1,07,.000 57,000 20,000]
includes (7) deducteg
5.2
) actual (3) reduced from (4) shall (5) distribution (6)
(2) shall not

(8) includes (9) includes (10) 2.00.000 (11) 10,000 (12) 1,80,000 (13) 15,000 (14) 72,000
(75) 10,000 (16) 1,60,000 (17) 1,25,000 (18) 5,00,000 (19) 96,000 (20) 1,00,000
(21) 30,00
(22) 20,000 (23) 1,50,000 (24) 1,20,000
5.3 A: (1) (d), (2) (1). (3) (a). (4) (g). (5) (c), (6)
- - - -

-(b). (7) -(e)

B:(1) (d), (2) (), (3) (a), (4) - (g), (5) - (c), (6) (b), (7) -(e)
C:(1) (d), (2) - (c), (3) (e), (4) - (b), (5) - (g). (6) (a), (7) ( )
D: (1) (b). (2) (g). (3) ( ) . (4) - (e), (5) - (i). (6) - (d), (7)- (h). (8) - (a), (9) - (c)

E:(1) (d). (2) (), (3) (a), (4)- (e). (5) (c). (6) -(b)
- -
-

F: (1)- (b), (2) (c), (3)- (e), (4) (a), (5) (). (6) (d)
- -
- -

G:(1) (a), (2) -(c). (3) (e), (4) (b), (5) -(d)
H: (1) (b), (2) (d), (3) (e), (4) - (c). (5) -(a)
:(1) (d), (2)- (). (3) (a). (4) - (h), (5) (c). (6)- G). (7) - (b), (8) - (). (9)- (g). (10) - (e)
J: (1) (h). (2) (c), (3) (e). (4) (a). (5) (d), (6) - (b), (7) (g). (8) -(
K:(1) (e). (2) -(d),. (3) (a), (4) - (f). (5) (c), (6) -(b)
L: (1) (d), (2) (h). (3) (e), (4) - (a). (5) - (c), (6) (). (7)- (b), (8) - (g)

4 True 2. 3, 13, 15
False 1, 4, 5, 6, 7, 8, 9, 10, 11, 12, 14, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25
 12. OBJECTIVEQUESTION
Financial Accounts
120 iation of Cost and
QUESTIONS
Stock Overvalu-
2conciliation Statement, Clos1ng
C H O I C E dded to
financial profit (b) de
financial loss (d) ad-
MULTIPLE only
in Financial Accounte
in .
educted from
shown
Statement, Opening Stock Overvaa
from financi t2conciliation
EXpeNses
(b) deducted cial costing profit
dded to
(b) de
12.1 Cotoscosting
stina Poa
ConceptualStatement,
(d)
added profit dded to
financial loss (d) d=

Reconciliation only
o nlyin Cost Accounts
in 2conciliation
Statement, Opening Stock Unde=
A profit
n
deducted from
s h o w n

n
financial

Expenses
(b) financi dded to
financial profit
1.
(a)
a d d e d
to
Statement,
(d)
deducted. from costina. proth
"9 Prmeducted
from financial loss
Statement, Depreciation
(d)a
Overct
()ignored
Reconciliation 2conciliation
profit reserves
are
proft (b)
financlal
dded to costing
in to
to deducted from financias financial loss (d
2. transters

(b) dded to
proft of
a d d e d

Depreciation Unde-
(a) Statement, to costing Statenent,
) ignored

Reconciliation (d) added 2conciliation

proft
profi y in
only
in Financial Accounts are dded to
financial

n
financial

financial loss
deducted from financia
s h o w n

3. to from
leducted
(a)
a d d e d I n c o m e s

(b) edDrot Statement, Ovemeads Under

(c) ignored
Statement,

d) deducted irom
cOsting Drn. 2Conciliation
costing profit
in Ei.
Reconciliation
profit dded to
U n d e r v a l u e d
loss
4. In
financial financial
to
to
from financial hdded Overheads Over
Stock

(b) deducted
added
Statement,
(a) Closing
econciliation
to costing profit profit
Statement,

(d) added
c ) i g n o r e d
financial
Reconciliation dded to loss
proíit
ccounts
financial

5. In
financial
in Fin leducted
from
Expenses debt
Ov
O ve
errv
valued
to
added Stockck Statement,
(a) Closing deducted from financial: Prof
econciliation
(b) Finacial
Profit
costing proft
c)ignored Statement,

dded to
Reconciliation
(d) deducted from Profit
profit from Costing
6. In financial
in Financial Accou leducted
added to O v e r v a l u e d
i above
(a) the
ny of
Stock

(c) ignored
Statement,
Opening
(b)
deducted from financial proft econciliation
Statement, Closing Stock

to costing profit Profit

(d) added
Reconciliation Finacial
7. In profit dded to
financial Profit
added to in Financial from Costing
ccounts
(a) Stock
educted
U n d e r v a l u e d

(d)
from financial proft above except
o n y of the
( ) ignored Opening
Statement,
(b) deducted Opening Sto Statement,

from costing
Reconciliation

In proft econciliation
8.
added to
financial profit (d) deducted from
Financial Profit

(a) in Financial Accountints is: i e d u c t e d Profit

added to Costing
Overcharged
) ignored Depreciation financial
Statement, deducted from profit
9. in
Reconciliation (b) above
any of
the
financial profit added to costing profit Statement, Depreciathe
(a) added
to (d) econciliation

in Financial Accounts Financial Proft

Undercharged leducted
from
(c) ignored Depreciation Profit
Statement, from financial profit deducted from
Costing
10. In
Reconciliation
(b) deducted (c)
profit from costing profit the above except
any of
financial
added to
a) (d) deducted Statement. Overhead
(c) ignored Under-Recovered in Cost Accounts ae econciliation
Finacial Profit
Reconciliation Statement, Overheads from financial profit added to
11. In Proft
added to financial profit (b) deducted deducted from Costing
a)
(c) ignored
(d) added to costing profit are one of the above

Overheads Over-Recovered in Cost Accounts

Reconciliation Statement, nerical
12. In financial profit
(a) added to financial profit (b) deducted from Accounts

from costing profit

Financial
deducted fit as per
(d) overheads

13. (c) ignored

In Reconciliation Statement, Expenses shown only in Financial Accounts are r recovery
of works
expenses
of office
ler recovery
(a) added to costing profit (b) deducted from
financial prol oncillation
statement will show

(c) added to financial loss (d) deducted from costing pro Profit as per
Cost Accounts 5
Accounts 5
14. In Reconcilation Statement, Expenses shown only in Cost Accounts aie
Profit as per Cost Accounts
a) added to financial profit (b) deducted from costing prolt fit as per
Financial

(c) deducted from financial loss of FOH

(d) added to costing profit ler recovery Stock i
15.In Reconciliation Statement, Incomes
shown only in Financial Accounis
re valuationof Closng
(a) added to financial profit recovery of AOH
(6) deducted from costing pro
c) deducted from financial loss (d) added to costing profit
16.In Reconciliation Statement, Closing Stock a n c i a l A c c o u n t s 5

(a) added to costing Undervalued in Financia pron

profit (b) deducted from
financial
c) added to financial loss p r o f t

(d) deducted from costing pro

 an of Cost and Financial Accouns
121
.liation Statement, Closing Stock Overvalued in Financal Accounts is
Reconchation State

financial profit
ed to (b) deducted from costing
)adide trom linancial loss prolit
deducted (d) added to costing prolt
c) ciliation Statement, Opening Stock Overvalued in Financiat
profit
Accounts 1
to COsting (b) deducted from linancial profit
added
al loss
financial
added to (d) deducted from costing prolt
cIc) a iation Statement, Opening Stock Undervalued in Financial
19 InH e c o r

Accountsis
financial profit
1a) added to (b) deducted from costing prolit
from financial loss
(c) doducted.

(d) added to costing profit

0In
Cncillation Statement, Depreciation Overcharged in Financial Accounts is
Heconcliatic

to costing profit (b) deducted from financial profit

a)added to financial loss
IC)
added (d) deducted from costing profit
conciliation Statenent, Depreciation Undercharged in Financial Accounts is
Recor
n
to financial profit (6) deducted from costing profit
(a) added
from financial loss
(d) added to costing profit
c) deducted
a Reconciliation Statement, Overheads Under-Recovered in Cost Accounts aro
to costing profit (b) deducted from financial profit
(a) added
to financial loss (d) deducted from costing profit
(c) added
nin Reconcilition Statement, Overheads Over-Recovered in Cost Accounts are
to financial profit (b) deducted from costing profit
(a) added
deducted from financial loss (d) added to costing profit
c)
Ain Reconciliation Statement, Expenses debited only in the Financial Accounts are
Finacial Profit (b) deducted from Financial Loss
(a) added to
deducted from Costing Profit (d) added to Costing Loss
(C)
above
(e) any of the
A/cs is
5.In Reconciliation Statement, Closing Stock Undervalued in Financial
(a) added to Finacial Profit (b) deducted from Financial Loss
c) deducted from Costing Profit (d) deducted from Costing Loss
(e) any of the above except (d)
6.n Reconciliation Statement, Opening Stock Undervalued in Financial A/cs is

(a) deducted from Financial Profit (b) added to Financial Loss

(c) added to Costing Profit (d) deducteed from Costing Loss
e) any of the above
in Financial A/cs is
7.Ih Reconciliation Statement, Depreciation Undercharged
(a) deducted from Financial Profit (b) added to Financial Loss
(c) deducted from Costing Profit (d) deducted from Costing Loss
(e) any of the above except (c)
In Reconciliation Statement, Overheads Over-recovered in Cost A/cs are
. (b) deducted from Financial Loss
(a) added to Finacial Profit
c) deducted from Costing Profit (d) added to Costing Loss
(e) none of the above

Numerical
Profit as per Financial Accounts 57,240
Over recovery of works overheads 240
Under recovery of office expenses 240
Reconciliation statement will shoW
57,720
a) Profit as per Cost Accounts 57,240 (b) Profit as per Cost Accounts
C) Profit as per Cost Accounts 56,/60 (d) Loss as per Cost Accounts -57,240
.Profit as per Financial Accounts 68,77,500
Under recovery of 97,500
FOHA
Over valuation of Closing Stock in Cost accounts 4,53,125
Over recovery of AOH 3,96,875
 Cost Accoun,

6 8 . 3 6 , 2 5 0
g-l S
122 Cost
Accounts

-
6 1 , 2 5 , 0 0 0

per A c c o u n t s

Profit a s 7 8 . 2 5 . 0 0 0

(a) Cost
Proft
as per Accounts 7 0 , 3 1 , 2 5 0
mciliution of ( o
(b) Cost
Prolit
as per Accounts 3,28.750
c)
Profit a s per
Cost
Books
2.00,000 .3 MATCHT
(d) Financial

1,93,750
a c c o u n i s

per
31. Proft
as
o v e r h e a d s
in cost a c c o u n t s
COLUMN
Factory
e x p e n s e s
in
financial

in cost
accounts
2,500 1 Interest p
under-absorbed

Factory
2. Donatto
o v e r h e a d s
show
Office statement
will
3 , 3 7 , 5 0 0
b) Profit
(b) Profit as per Cost
as
Acca 3. Interest
Reconciliation

d) Profit as perCost
(d) Notional
Accounts
Accounts

perCostAccounts
3,25,000
Profit as 5 Notional
(a)
as perCost 43,000 for drawin
(C) Profit records

Proit as per
cost 1,000
32.
Works overhead
less charged8,000
overcharged
52,000
(b) Profit as per linancial book
expenses
Office books

(a) Profit as
per
financial

financial
books
50,000 (d) Profit as per inancial books
Profit as per
(c) Accounts
Cost in cost accounts
33. Profit as per
oveheads
administrative
Over-absorption
of accounts only
recorded in financial
Dividends
received
stock COLUME
Over valuation
of closing
in cost accounts
of direct Expenses 1. Interest
Under absorption
statement will
show
Writing
Reconciliation
66,000 (D) Proit as per financial ace 2B. Interest
financial accounts
(a) Profit as per
accounts 54,000 (d) Profit as per financial
ncial aaccounts 4 Notional
(c) Profit as perfinancial ,000 5. Notional
accounts
34. Profit as per cost 10.000
Income from investments
in financial accounts
5,000
underabsorbed in cost accounts
Wages 20,000
financial accounts
Loss on sale of fixed assets in
Reconciliation statement will show
(a) Loss as perfinancial accounts 21,000 (b) Profit as per financial accounts
11,000 (d) Profit as per financial accouns
(c) Loss as perfinancial accounts
35. Loss as per cost records 1,47,440
Loss on sale of Fixed Assets 8,40,000
COLUM
Income From Investments 4,00,000
Reconciliation statement will show Interes
(a) Loss as per Financial records 13,87,440(b) Profit as per financial records 2. Writing
(c) Proft as perfinancial records- 5,87,440 (d) Loss as per Financial recods 3 DiVide
made
12.2 FILL IN THE BLANKS Notion
Costin
1. Interest paid on Loans
appears only in (financial / cost) accounts.
2. Notional Remuneration to Owner accou
appears only .
in (financial/ cost)
3. Discount on Issue of
4.
Debentures appears only in
Notional Interest charged to
(tinancial / cost)
accou

5 Loss on
owner for drawings appears only in-
sale of Investment
-(financtal

6. Income Tax
appears only in. financial/ cost) accouns
appears only in
Dividend received appears only -(financial/ cost) accounts.
.

7
8. in (financial/ cost) accounts.
9
Damagesawarded by Court appear only in (tfinancial / cost) accouns
Expenses which appear only in Cost
(notional/ actual) items Accounts and
and notnot in
in Financial
Finans Accou
10.Under
-system, there is no need of n d tmanciala

reconciliation of cost an
 123
'econciliation of Cost and Financial Accounts

12.3 MATCH THE FOLLOWING

COLUMNA COLUMNB
Accounts
1.
Interest paid on Loans (a) Income credited only in Cost
Financial
2. Donations (b) Expenses debited only in the
Interest Received on Loans Accounts
3.
4. Notional Interest on Owner's Capital (c) Debited in both financial and cost
5. Notional Interest charged to owner accounts
for drawings lgnored in both financial and cost
(d
accounts
(e) Appropriations only in Financial Accounts
() Income credited only in Financial
Accounts
(g) Credited in both financial and cost
accounts
(h) Expenses debited only in Cost Accounts

COLUMN A COLUMN B

1. Interest paid on Debentures a) Income credited only in Financial

2. Writing Off Goodwill Accounts

3. Interest Received on Fixed Deposits (6) Income creditedonly in Cost Accounts
4. Notional Remuneration to Owner (c) Expenses debited only in the Financial
5. Notional Rent charged to owner Accounts
(d) Credited in both financial and cost
accounts
(e) Ignored in both financial and cost
accounts
Expenses debited only in Cost Accounts
(9) Appropriations only in Financial Accounts
(h) Debited in both financial and cost
accountsS

COLUMN A COLUMNB

1. Interest paid on Fixed Deposits (a) Income credited only in Financial

Writing Off Preliminary Expenses Accounts
2.
3. Dividend Received on Investments (b) Credited in both financial and cost
made in Shares accounts

4 Notional Rent charged to Owner (c) Excess profits as per Cost Accounts
5. Costing Closing stock over-valued (d) Expenses debited only inthe Financial
Accounts
(e) Expenses debited only in Cost Accounts
() Debited in both financial and cost
accounts
(g) lgnored in both financial and cost
accounts
(h) Appropriations only in Financial Account
 124 Cost Accounting -i
(s. Y,R.
COLUMNB
y.B.A.
[D] COLUMN A

Expenses on Issue of Shares (a) Income credited

2. Machinery scrapped (b) Debited in both
only in C
Premium on Issue of Shares accounts
financal and
u
4. Income Tax c) Credited in both
financial and
Overheads over-recovered accounts an

td) Losses debited orly

Accounts
in the F
(e) lgnored in both financial and th
accounts

(g)
Appropriations only Financial .
Less
in
profits as per Cost
(h) Expenses debited only inAccount
the F
Accounts
Income credited only in
Accounts Financial
12.4 STATE
WHETHER TRUE OR FALSE
1. Profit as per cost accounts is the
2. same
as profit as
Notional interest on per the financial
3. Owner's capital accounts.
Goodwil written off appears only financial profit and loss
in
4. Overheads appears only in cost accounts. a/c.
are taken on
Profit as per cost estimated basis in Financial Accounts.
system of accounts. accounts is the same as
profit as per the financial
6.
Reconciliation of cost and financial accounts, in case of
accounts. accounts is
intege
7.
Expenses necessary, in case of
notonal iterns.
which appear only in Financial Accounts and
non-integrated system
8. Need for not in Cost
9. Reconciliation arises in case of
Accounts are genera
Need for
Reconciliation Integrated
10.Closing Stock of finished does notin arise in case of System of Accounts.
lower goods Cost Books is Non-lntegral
valued at cost orsystem of Accounts.
11.Closing Stock of net
realizabie value
12. The under/ over work-in-progress
in financial
books is whiche
Cost profit when recovery of overheads generally valued at cost of
such under/ over may result in
13.Divided paid is a recovery Is charged difference goods produca
between Financial
14.Transfer to generalfinancial income. to
Costing Profit & Loss proft a
reserve is credited to Account
financia!
12.5 CHECK YOUR profit and loss
12.1 ANSWERS a/c.

1 (a) 6 ( 11.
2 (b) 7 (a) 16. (d)
3
(a) 12. (b) 21
(d)
(a) 8 17. (d) 26
(b) 13. (d) 22
(d) (e)
4
(b) 9 (a) (d) 18
23. (d) 27. e) 31 (C)
5
14. (d)19(d) 32
(a) 10 28. (e) (c)
(b) 15 (d) 20 (dh 24. (e)
Hints (d) (25o ) 29. (a) 33. (a)
(e) 30 (d) 34 (c)
29.157,240+ 240 240 35 (d)
30.168,77,500+ 97,500+ 4,53,125
31.328.750+2,500 (2,00,000 3,96,8751
93,750)
32.143,000 1,000 8000)
33.11,1 ,400 30,000+
34. 10.000 4,000 5,0006,000 32.400 48,000
20,000
35.1,47,440+ 8,40,000- 4,00,000]
 125
econciliation of
Cost and Financial Accounts
(1) financial (2) cost (3) financial (4) cost (5) financial (6) financial (7) financial (8) tinancia
12.2
(9) notional (10) integrated
12.3 A: (1) (b), (2) (e), (3) (1).
B : (1) ( c ) , (2) - (9). (3) -
-

(4) - (h),
(a). (4) -
(5) (a)
(1), (5) - (b)

C : (1) ( d ) . (2) - (h), (3) - (a). (4) - (e). (5) - ( c )

D : (1) ( h ) , (2) - ( d ) , (3) - 0 , (4) - ( ) . (5) ( g )

12.4 True 5, 6
False 1, 2, 3, 4, 7, 8, 9, 10, 11, 12, 13, 14

13. PRACTICAL PROBLEMS

13.1 ANSWER IN BRIEF [INTERNAL TESTS]

amounted to
net profit shown by financial accounts of a Co.
.1 (Financial Profit Given): The
37,100. The following details are available
1,300
)Director's fee not charged in cost
accounts
1,140
doubtful debts
)A provision for bad and 60
Bank interest 17,000
were estimated at
Overheads in cost accounts 16.640
financial books was
e charge shown by accounts.
shown by the cost
profit
epare statement showing 60 (17,000 16,640) = 39,120]
1,140
[Ans.:37,100+ 1,300 + 86,352 as per costing records
Profit Given) : The profit
of a company appeared at
2(Costing
are available:
e following details accounts 5,600 and recovered in
costs 6,250
Depreciation charged in financial
2,850.
fire charged in financial records
asset due to
Lossof
Incometax paid 20,150.
Transfer fees received 7 375. records.
financial 64,377
culate the profit or loss as per 5,600) + 375 -
2,850 20,150
[Ans.:86,352+ (6,250 and loss account is available

Given): The following

extract of the profit
&LExtract 31-12-2013
Account For the Year Ending
Appropriation
Profit and Loss
Particulars
40C
iculars By Dividend Received
200
100 Bv lnterest on bank deposit 15
ne
10.Profit
on
Incomple
for
an
n c o .

Ans.. Para
ofprofit
(AnsP
11 Notional Proft
credit

taking
for
Principles

12
13 Work-in-Progress

14.Escalation Clause

OBJECTIVE QUESTIONS

9.
M U L T I P L E C H O I C EQ U E S T I O N S

9.1
9.1.1 Conceptual
of order costing
method Specific
is a
basic (b)
(d) Standard costing
Contract
costing
1. (a) Historical costing
Costing.
(c) Process costing (b) P r o c e s
is a
variant of
Contract costing (d) Batch
2.
(a) Job
(c) Unit in (b) Textile Mills
applicable
usually (d) Chemical Industries
Contract costing
3. (a) Constructional Works
u n d e r t a k e n .

(c) Cement Industries Contract job is

whom the (b) Contractee
for
IS the person
(d) Job-worker

(a) Contractor

(c) S u b - c o n t r a c t o r
contract
cost ?
is not a Depreciation
of plant
Which one of the following (b)
5. (d) Architects' certificates
(a) Direct wages
(c) Sub-contractors' fees the work certified with
determined by comparing
work is
completion of progress
6 The degree of (b) Work in
(a) Contract price (d) Retention money
on contract
of the profit
on
c) Cash received
is taken only for a part
In contract costing credit (b) Incomplete contract

(a) Completed contract (d) Work Certified

(c) Work uncertified
is made on the basis of
contractor
of cash to the
8. In contract costing payment (b) Certified work
(a) Uncertified work
(d) Retention Money
(c) Work in progress
sub-contracted work is
9 The cost of any account
debited to the contract
of a contract and is
(a) A direct expense the contract account
contract and is debited to
An indirect expense of a
(b) debited to the client account
a contract and is
(c) A direct expense of client account
of a contract and is debited to the
(d) An indirect expense
received by the contractor from the client
are
10.Progress payments
contract account (b) Credited to the contract acount
(a) Debited to the
account
(c) Debited to the client account (d) Credited to the client
11 Retention Money is equal
to

(a) Work certified Less Work

uncertified

(b) Contract price Less Work certified

(c) Work certified Less Payment received by contractor

(d) None of the above

12. Mat ial supplied by the Contractee
Contract Account Account
(a) is debited to the (b) is ignored in the Contract ount

(c) is credited to the

Contract Account (d) is debited to the Contractee's ACCo
 205
ost or d e s t r o y e d
lost c
material
t h o
Contract Account
of
to
:3stCreaned Cor ontract Account
the
to
a l s
ed
the
Cos Profit and Loss Account
to
t e b i t e d
osting Profit and Lobs unt
valued at
d is
Certiied
(b) Market price
C o s tp, r i c e

whichever is less
m a r k e t
p r i c e

(d) Estimated price

or Less Profit =
Cost
V o r k
Certified
C e t i f i e

)Work-in-progress
lue
of
(b) Cost of Work Certified
.

Retention Money (d) Cost of uncertified work

value
Work
o f Work Completed during an
accounting year is equal to
TneTotal rtified+Progress Payment Received
W o r kC e r t i f i e

Certified
+ Nork Uncert1fied
R e t e n t i o n Money
Work
+
tak Certified above
of t h e
None
is equal to
Profit
Notonal Less Cost of work certified
Work
ertified
)
certified Less Cost of work completed
D )W o r k
Less Work certified
Cavment received
above
None of the
d)
Wok-in-progress
at year end is equal to
closing stock of mat r (b) only work certified
la) only d
work
uncerti*
(d) the total of all the above
c) only
is less t.an the contract
price. The transfer to P & L A/c will be
Work certiliedNotional
a) 1/3 rd of prof (b) NIL
c) 2/3 rd
of Notional profi (d) 100% of Notional profits
Wok certified is between 25% and 50% of the contract price. The transfer to P &L A/c will be
al 1/3 rd of Notional profits, reduced in the ratio of cash received to work certified
b) NIL
C2/3 rd of Notional profits, reduced in the ratio of cash received to work certified
( 100% of Notional profits
. Work certified is between 50% and 90% of the contract price. The transfer to P & L A/c will be
a) 1/3 rd of Notional profits, reduced in the ratio of cash received to work certified
(6) NIL
23 rd of Notional profits, reduced in the ratio of cash received to work
certified
(0) 100% of Notional profits
2Ihe entire contract is complete. The transfer to P 8&L A/c will be
) 1/3 rd of Notional
c) 2/3 rd of Notional profits
(6) NIL
profits (d) Entire profit
a contract is 40% complete, credit taken to the profit and loss account is
a) 40% of
the notional profit
1/3 ro of Notional profits, reduced
c) NIL in the ratio of cash received to work certified

12/3 rd of Notional
profits, reduced in the ratio of cash received to work certified
2Numerical
ue of work
S of work tocertified
date
T 5,00,0000
of
work
-

4,00,000
ional Profitnotis yet certified 1,00,000
R100,01,00,000
Loss 00 (b) Nil
(d) 2.00,000
206 Cost Accounting -

II (S.
Y.R
is contract is Ano.
60,000 and the
A.E:S SEy
25.The total profit on a contract for 3,00.000
thenompltheetean
been certified accordingly. The retention money is 20o Of the certified valtoOm
e,
and Loss Account
profit that can be prudently credited to Profit
(b) 36,000
(a) 60,000
(d) 48,000
(c) 28,80o
26.Contract cost 2,80,000
Contract value R 5,00,000
Cash received 7 2,70,000
Uncertified work - 30,000
Deduction from bills by way of retention money is 10%.
How much profit, if any, you would take to the profit and loss account?

(a) 50,000 (b) 33,333

(c) 30,000 (d) Nil
27-28 Total cost of contract to date 3,83,000
Cost of contract not yet to certified 23,000
Value of work certified -4,20,000
Cash received to date 3,78,000
27. Value of work-in-progress is
(a) 65,000 (b) F 41,000
(c) 23,000 (d)F 14,000
28.Reserve for contingencies is
(a) 60,000 (b) 24,00o
(c) 36,000 (d) 1,000
9.2 FILL IN THE BLANKS
1. Contract costing is a variant of . - (Job/ Process) Costing.
2. is the person for whom the Contract job is undertaken.
3. Material supplied by the Contractee. (is / is not) debited to the Contract Account.
4. Cost of material Iost or destroyed is . - (debited/ credited) to the Contract Account.
5. (Profit on / Cost of ) material sold is credited to the Contract Account.
6. Cost of Closing Stock appears on the
(debit/ credit) side of the Contract Account.
7. The Contractee's Account is. - (debited / credited) and the Contract Account is -
(debited/ credited) with the Contract Price, on completion of the Contract.
8. When the Contractee makes any Band
payment towards the Contract Price,
Contractee's) Account is debited and - (Contract/ Contractee's) Account is credren
the amount so received.
9. Value of the work certified but not paid is known as.
money.
10.TDS A/c is shown as part of the current. (assets / liabilities) of the contractor.
11. If the contract is less than . -% complete, no profit should be taken into
12. If the Contract is complete between 25% and 50%
account
(1/3 or 2/3) of the notional
reduced in the ratio of cash received to work certified, be transferred to the
and

account.
may pio
13. If the Contract is complete between 50% and 90% - (2/3 or 100%) of the notiona
reduced in the ratio of cash received to work certified, and
account.
may be transferred to the plo
14.Value of Work Certified (Less / Add) Profit Cost of Work Certified
15.Contract Price 10,00,000, Work Certified 60%; value of Work Certified is .
16.Cash received 4,80,000 being 80% of Work Certified; value of Work Certified i
17.Retention Money= Value of Work.
- (Certified/Uncertified) Cash Recea0pa
18.Contact price 5,00,000, work certified 60%, payment received from contractee
received from contractee is
19. Total osts incurred todate R11,20,000 to complete 60% of the contract work. Howeve
gave certificate only for 50% of the contrac price. Cost of Work Uncertitiedishect
20.Cont act Price ? 6,00,000, T1oth of the contract was completed. Howevacred
only for 50% of tne contract price on which Cost inco
80% was paid.
O paid. o*
Work Uncertified is
3,50,000. Cost of
 ing 207
n t r a c t P i o e6 , 0 0 . o n0 7/1oth of the contract
was
50% of the contract price on
which 80%
completed. However, architect gave
for
ficate only from ccontractee is
ived fromn
r e c e v e d
was paid. Cost
incurred to date
Payment
00. Certified
F 2,50o,000; Cost of Work Uncertified 20,000; Total Cost incurred
C e r

ork
W o r k
Notional Profit is till
of
1,20,000.
y a l u e

a O00, Current coOst incurred to date F 4,00,000, Cash received 80%. Value
Contract
d a l e

f wotk
F
certified
Pnce

Qo.000, Cost of work uncertified 2,40,000.

1,90,0000,
Amount of profit credited to P &
Contract
AC'S PriceR8,0
a 00.000, Current cost incurred to date T
4,00,000, Cash 80%. toValue
of received
L

00.000, Cost of Work uncertified 2,60,000. Amount profit credited P&

g fw O r kcertified

is
AC
is A.00,000, Current COst incurred to date 7 4,00,000, Cash received 80%. Value
act Prce 4.00,000, Cost of work uncertified 1,20,000. Amount of profit credited to P &
o f
w o r kc e r t

LACisF P r i c e 8 , 0 0 , 0 0 0 , Current cost incurred to date 7 4,00,000, Cash receive 80%. Value
workcertified
C o n t a c t
d 44,80,000, Cost ot work uncertified64,000. Amount of profit credited to P &L

ACis _
Dice 5,60,000, Current costs incurred to date 5,00,000, Value of work certified
7.Contract

Cost of work uncertified 2,000, Estimated additional costs likely to be incurred to

20,000, unfinished work R 2,00,000. Amount of profit/(loss) taken to P& LAlc is -
4,20he

COLUMNS
MATCH THE FOLLOWING
cOLUMN A (Terms) cOLUMN B (Statements)

(a) The person who undertakes the Contrac

1. Contract
(b) Amount certified but not paid
2
Contract Costing
Expert who issues a Certificate of work|
3. Contractor (c)
4. Contractee completed
A high value job spread over two or more
5. Contract Price (d)
office
Chartered Engineer years executed away from main
6. Amount debited to Contractee and
7. Retention Money (e)
credited to Contract A/c on completion
8. Work completed
of contract
9. Notional Profit
Work certified + Work done but
(1)
uncertified
Work certified -
Cost of work certified
(g The person for whom the Contract job
(h)
is undertaken
A variant of Job Costing
)
COLUMN B (Transfer to Profit
COLUMN A (% of Work Certified and Loss Account)
To Contract Price)
Notional Profit x
Cash Received
(a) x Work Certified
Up to 25
Cash Received
Estimated Profit x
2. 25 - 50 (b) Contract Price

(c) NIL
50-90 (d) Entire Profit
Nearing Completion xash Heceved
x Notional Profit Work Certified
100 (e)
208 FALSE
.I.B.A.E:S
TRUE OR
WHETHER Cos

9.4 STATE
C o n t r a c t e e (eg.
cement
in constnuction

act) is det
supplied by the
1. Any
material
debited to the ntract
Contra Account
Contract Account
Contract Acco.
destroyed
is
matenal lost or credited to the
2 The cost of contract is
material tor a contract is Credited
tor a contract is cr

sale price of plant

purchased
3The

The price received on sale

of special thec
Certified
Account.
Payment received
Less Work
is credited to the
Hetention Money entire profit profit and
than 25% complete.
credited to the profit loss a
6. f the
contract is less
40%
notional
ofthe prolit is nd loss a
. f a contractis 40%
complete,
notional profit is
ed to the
credited
profit An s
1/3 of the
fa contract is 60% complete, 100% of the notional ins
notional loss.
8.
9. A contract is 40% complete.
There is a
deble
profit and loss account. to the Contract Account
materials is debited
10.Cost of normal wastage of contract is transierred to the Costin
materials in a
11. Cost of abnormal wastage of Proln
Account. the contractee is known
of price not paid by
ao.

12. In contractcosting, the percentage include uncertified work margn

13. In contract costing, the work -
in - progress does notwhich produces
for a manufacturer, product as

14.Job order system is appropriate

job is a big contract. pecal
15. A contract is a small Job while a
16. Work certified is valued at cost.
17.Work uncertified is valued terms of contract price.
18.Work-in-progress is valued at cost plus profit which has not been taken to the Ptofit a
19. Cash received on contract is credited to Contract Account.

9.5 CHECK YOUR ANSWERS

9.1

1. (6 5. (d) 9 (a) 13. (a) 17. (a) 21. (c) 25.

2. (a) 6. (a) 0. (d) 14. (a) 18. (d) 22. (d)
3.
26.
(a) 7. (b) 11. c) 15 (6) 19 (b) 23. (b) 27.
(b) 8. (b) 12. (b)
16 (6) 20. (a) 24 (d) 28
Hints
24.[5,00,000 (4,00,000 1,00,000)]
25.[60,000 x 80% x 1,80,000 x
3,00,000]
26.[Notional profit =[(2.70,000 x 100/90) +30,000]-2,80,000 50,000; Tfd. To P&L:500M
x 90/100]
27.[4,20,000 +23,000 24,000 3,78,000]
28.[(4.20,000+ 23,000 3,83,000) x 2/3 3,78.000/ x
4,20,000]
9.2 (1) Job (2) Contractee (3) is not
Bank; Contractee's (9) retention (4) credited (5) Cost of (6) credit (7)
(16) 6,00,000 (17) Certified (10) assets (11) 25 (12) 1/3 (13) 2/3 (14)
debited.15
1,50,000 (23) Nil (24) 16,000 (18) 2,40,000 (19) 20,000 (20) Le85 400
9.3 A: (25) 64,000 (26) 76,800 1,00,000 (21)4
(1) (d), (2) -(). (3) -(a), (4)- (h),. (27) (1,40,000)
(5) (e). (6) - (c).
B:(1)-(c). (2) (e), (3) (a). (7) - (b), (8) - (0). (e
9.4
True:4, 9, 10, 11, 14 (4) (b). (5) (d)
False 1,2,3, 5,
6, 7,8, 12, 13, 15, 16, 17,
18, 19
 Stocks [Ans.: Para 4]
13.mtermediary Products
14 Joint Products [Ans.: Para 4]
15 Co products Ans.: Para 6]
16 Joint [Ans.: Para 6.2]
17 Products
Spit off Point vs. [Ans.: Para 8.1]
18 Joint Costs
Co-products [Ans.: Para 8.1 (4)]
19 [Ans.: Para 8.1 (5)]
Apportiornent of Joint Costs
20. mpotance [Ans.: Para 8.1 (6)]
of [Ans.: Para 8.1
of Apportionment of Joint Costs
21
Objectives (7)]
ofApportionment of Joint Costs
22 [Ans.: Para 8.2]
Advantages
23 Lmtations of Apportionment of Joint Ans.: Para 8.2 (2)]
Costs [Ans.: Para 8.2 (2)]
Apportionment of Joint Costs
24 Allocation of Joint
[Ans.: Para 8.2 (2)]
25 Allocation Costs by
Costs by Physical Unit Method
of Joint Ans.: Para 8.2 (3)]
26 Allocation of Average Cost Method [Ans.: Para 8.2 (4) 1]
Joint Costs by Survey
27 Allocation of Method [Ans.: Para 8.2 (4) 2]
Joint Costs
28 Allocation by Marginal [Ans.: Para 8.2 (4) 3]
of Joint Costs by Market Contribution Method
29 By-Products Value Method [Ans.: Para 8.2 (4)- 4]
30. Methods of [Ans.: Para 8.2 (4)-5]
Apportionment of Costs of [Ans.: Para 8.3]
By-products [Ans.: Para 8.3 (4)]
11 OBJECTIVE QUESTIONS

11.1 MULTIPLE CHOICE

QUESTIONS
PROCEsS COSTING MAIN
PRODUCCT
A Conceptual
1 Process costing is applied when
(a) small number of different
products are manufactured
(b) large number of different products are
manufactured
eTarge number of identical products are manufactured
(d) small numbers of customised made-to-order
2. Which of the following does not use
products are manufactured
process costing ?
(a) Oii refining (b) Distilleries
(c) Sugar Air-craft manufacturing
.Which cost accumulation procedure is most applicable in continuous mass-production
manufacturing environments?
(a) Standard (b) Actual
ey Process (d) Job order
 JU6

4. Which of the following statements is false?

according to processes or aepartments
aprocess costing, cost is accumulated
is job order
or batcn size
the basis of cost accumulation
i n job costing, basis
(C) In process costing, cost is accumulated on time
the cost period
cost is at the end of
GPn job costing. computed
5 Process Cost is based on the concept of
(b) Marginal Cost
la) Average Cost
(d) Differential Cost
(c) Standard Cost
6. Normal Loss is equal to
Normal Output
(a) Normal Output Actual Output (b) Actual Output
above
(pInput x % of Normal Loss (d) None of the
Normal Output is equal to
Normal Loss
J6) Input
-

(a) Input Abnormal Loss

(c) Input Abnormal Gains (d) None of the above

8. Unit Cost is equal to

Aá) Normal Cost Nomal Output (b) Total Cost Normal Output

(c) Normal Cost Total Output (d) Total Cost+ Total Output
9. Abnormal Loss is equal to
Actual Output Normal Output
(a) Input- Actual Output (b)
e) Normal Output Actual Output (d) Actual Output - Input
VTO. Abnormal Gains are equal to
Ja) Actual Output Normal utput (b) Normal Output Actual Output
(c) Actual Output - Input (d) Input- Actual Output
11. Process cost is very much applicable in
a) Construction Industry (b) Pharmaceutical lIndustry
(c) Airline Company (d) None of these
12. In process costing, each producing department is a
(a) Cost unit C o s t centre
(c) Investment centre (d) Sales centre
13. Which of the given units can never become part of first department of Cost of Production Repor?
(a) Units received from preceding department
(b) Units transferred to subsequent department
(c) Lost units (d) Units still in process
14. When production is below standard specification or quality and cannot be rectified by incurng
additional cost, it is called
(a) Defective (b) Spoilage
(c) Waste (d) Scrap
5. What will be the impact of normal loss on the overall per unit cost ?
a) Per unit cost will increase b) Per unit cost will decrease
(c) Per unit cost remain unchanged d) Normal loss has no relation to unit cost
B Numerical
16.12,000 kg of a material were input to a process in a period. The normal loss is 10% of inpu
There is no opening or closing work-in-progress. Output in the period was 10,920 kg. What wa
the abpormal gain/loss in the period ?
pAbnormal gain of 120 kg (b) Abnormal loss of 120 kg
(c) Abnormal gain of 1,080 kg (d) Abnormal loss of 1,080 kg
17.Wastage of a raw material during a manufacturing process is 20% of input quantty. What ingu
quantity of raw material is required per kg of output?
(a) 0.8 kg (b) 1.2 kg
c1.25 kg (d) 1.33 kg
of the
18.400 litres of a chemical were manufactured in a period. There is a normal loss of 25o
material input into the process. An abnormal loss of 5% of material input occurred in the p
How many litres of material (to the nearest litre) in the
were input into the process pet
(a) 500 (b) 520
(c) 560 (dy 67T
 CESsCosting

307
9 ACompany
uses process costing to value its
put
matenals 2,00 units
at 4.50 per unit output. The foliowing was recorded for the perioa.
Conversic costs 7 13,340
Nomalloss 5% ofinput
valued at 3 per unit
loss 150 units
Actual
There were no ening or closing stocks.
What was
the aluation of one unit of
valu.
(a) 11.8
output to one dcimal place?
(c)11.2
(by 11.6
AoCompany uses process costing to value its (d) 11.0
process.
and output all materials are input at the start ot the
rmation
The following inform relates to the
Input 3,000 units process for one month:
Opening stock 400 units
OSses 10% of input is expected to be lost
Closing stock 200 units
How many good units were
output from the process if actual losses were
2,800 units 400 units?
(c) 3,000 units
(b) 2,900 units
t The cost of production of 40 units in Process (d) 3,200 units
I consisting of materials 7
and Overhead 164. The normal waste is 5% of 1,500; Labour 1,300
(a) 40 units are transferred to next
input.
process T each
(b)40 units are transferred to next process 7 70
38 units are transferred to next process @ R74.10
each

(d) 40 units are transferred to next

78 each
process @ 78 each
.Particulars for Process A.
Materials (200 Units) 4,000
Labour 3,000
Indirect Expenses 2,000
Normal wastage is 5% of the input. One unit of is sold at
wastage 16.50 each.
(a) 190 units are transferred to next process at 7 9,000
(b) 200 units are transferred to next process at 9,000
(c) 190 units are transferred to next process at 7,000
(g-+90 units are transferred to next process at 7 8,835
3. In process Y, 75 units of a commodity were transferred from process Xat a cost of 1,310. The
labour and overhead expenses incurred by the process were 190. 20% of the
units entered are
normally lost and sold 7 4 per unit. The output of the process was 70 units.
(a) Process Account Credit Side showed Abnormal Gains of 240
(b) Process Account Debit Side showed Abnormal Loss of 240
(c) Process Account Credit Side showed Abnormal Loss of 240
(d) Process Account Debit Side showed Abnormal Gains of 240
4. Input in a process is 4000 units and normal loss is 20%. When finished output in the process is
only 3,240 units, there is an
(a) Abnormal loss of 40 units (b) Abnormal gain of 40 units
c) Neither abnormal loss nor gain (d) Abnormal loss of 60 units
$.Details of the process for the last period are as follows
Put into process 5,000 kg
Materials T 2,500
Labour 700
Production Overheads 200% of labour
Normal losses are 10% of input in the process. The output for
the period was 4,200 from the
process. There was no opening and closing work-in-process. What were the units ofkgabnormal
loss
(a) 500 units Ab) 300 units
c) 200 units (d) 100 units
 uDo O
donormal loss is creant
& loss) account. gprof
15.Realizable value of abnormal loss is credited to. (Process/AbrAbnormaB Loss) Account
OnOmal Loss (is/is notabsorbed by good units in process costing
cost per unit of output,
17. al 7 Abngmal) process loss does not affect the
- (debited/credited)to the
18.The sale value of uníts of abnormal gains is-
account.
abnormal gain
19.Realizable value of abnormal gain is debited to (Prodpss/ Abnormal Gains) Acco
20. the sale value of units of abnormal gains is credited to the (abnormal gains nom
loss) account.
21.The cost of units of abnormal (debíted/credited) to the Process account
gain is -

22.The cost of good units. - ( i s / is not) reduced by the abnormal gain in process costina

23.Abnormal loss is. (debited/ credited) to Process Account and Abnornal Gain is
(debitéd/credited) to Process Account.
. Joint Products /By-Products
Z4.When a production process is such that from a set of same input, two Or more distinguishahi.
diferent products are produced together, products of greater importance are termed as
products.
25. Ihe costs incurred prior to the point of separation of the by-products are termed as
Costs.
26.The costs incurred. - (before /after/ up-to) the point of separation of the joint-productsar
termed as Joint Costs.
27.The physical unit method of allocation of (equal/ unequal) importance
and value to all the joint products.
joint costs gives.
28. In case by-products are produced, the net realizable value of by-products is
credited) to the cost of production of the main product. (debited
29. - (Separable / Joint) costs are assignable after the splitoff point.
.A. (joint product/ by-product) has a minimal sales value.
31.Joint products are of . (equal/ unequal) importance.
32. The proportion of joint
products. (can/cannot) be changed at the will of the management
33. Joint products are produced from. (same/different) material(s).
34. Joint products are produced from (same/ diferent) process(es).
35. Split off point refers to the point at which joint products are (separated / sold).
36.Joint costs refer to the total cost incurred
upto the point when the products are. (separated
sold).
37.Joint costs = Common materials costs+
(Common / Subsequent) processing costs.
38.Apportionment of joint costs affects the (overall/ product-wise) profitability.
39. Product (should be / should not be) processed further if the incremental sales revenue
after further processing exceeds the further
40. Product
processing costs.
(should be/should not be) sold at split off point if the incremental sales revenue
at split off point is less than the further
processing costs.
11.3 MATCH THE FOLLOWINGCOLUMNS
[A cOLUMN A
COLUMNB
1. Normal Loss
2.
(a) Normal Cost / Normal Output
Normal Output
3.
(6) Unit Costx Units of
Abnormal Loss
Unit Cost
4. (c) Unit Costx Units of
Actual Output
Abnormal Loss
(d) Input x % of Normal Loss
. Abnormal Gains
6. Cost of Actual Output (e) Actual Output Normal Output
7. Cost of Abnormal Loss (1) Unit Cost x Units of Abnormal Gains
8. Cost of Abnormal Gains (g) Input Normal Loss
(h) Normal Output Actual Output
 process COStng

cOLUMNA 311
1 Equal economic importance COLUMNNB
2. Credit NRV to cost of (a)
3. Sales values of production Contribution Margin Method
spilt off point products at the (b) Average Unit Cost Method
Add costs of further (c) Physical Units Method
after split-off points processing (d) By-products
(e) Joint Products
5. Deduct estimated profit () Market value
6. Apportion Variable margins
of units produced Costs on basis (g) Market value
at
at
finished state method
point of separation
method
(h) Net Realizable Value Method
114 STATE WHETHER TRUE
ORFALSE
Process Costing -Main Product
1. The sale value of
residue etc. is
Invisible waste has no credited to the
sale Process Account
The sale value of scrap, is value.
Normal Loss is always more than the cost
treated
as normal
cost of
of production, leading to abnormal
6. The actual sale of units
of production. gains.
6. The sale value of the
scrap representing
units of abnormal normal loss is
loss is credited to credited the Profit & LOSs AC.
to
1. The sale value of units of the
to the normal loss abnormal gains is debited Process A/c.
account. to the abnormal
A. The cost of units of gains account and credited
abnormal loss is credited to
9. The cost of units of
abnormal gain is debited to the Process account.
10.The sale value of units of abnormal the Process account.
11. Abnormal loss is loss is credited
charged to costing profit and loss to the abnormal loss account.
12.Costs accumulated time
are
by account.
13.Process costing period in a process costing
is
ordinarily
applied where all the system.
14. Process Costing is used in operations are
performed in one
15. The cost of good units is
case of industries
where work is done department.
reduced by the abnormal against specific order
gain in process costing.
Joint Products By-Products
16.When two or more
inputs are used
together to produce a product, such
joint products. inputs are termed as
17.When two or more
as by-products.
products are produced together, products of
greater importance are termed
18.The costs incurred after the
19. The
point of separation of the joint-products are termed
physical unit method of aliocation of joint costs gives as Joint Costs.
joint products. equal importance and value to all the
20. In Contribution Margin Method, the variable costs are
basis of the contribution ratios. apportioned over the joint products on the
21. Under the
Market Value method, the joint costs up-to the
ratio of sale values of point of sale are apportioned in the
2. In case
joint products at such point.

of
by-products are produced, the net realizable value of by-products is credited to
production of the main product. the cost
3.A byproduct has a minimal sales value.
4.Joint products are of unequal importance.
.he proportion of joint products can be changed at the will of the
management.
int products are produced from the different processes.
plit off point refers to the point at which joint products are sold.
-JOint costs refer to the total cost incurred upto the point when the products are sold.
Ont costs =
Cornmon materials costs + Subsequent processing costs.
 COSt. (S.
312 Y. B.A. F:

11.5 CHECK YOUR ANSWERS SEM-III

11.1
8 (a) 15. (a) 22 (d) 29 (c) 36. (c)
(c) 30. 43. d)
9. (c) 16 (a) 23. (d) (b) 37. (c)
2. (d) 31. 44
10. (a) 17 (c) 24 (b) (C) 38. (b)
3. (c) 45. (d)
4. (d) 11. (b) 18 (d) 25. (b) 32 (b) 39 (d)
26. (a) 33. (c) 40. (a)
5. (a) 12. (b) 19 (b)
6. (c) 13. (a) 20. (a) 27. (a) 34. (b) 41. (c)

7. (b) 14. (b) 21. (C) 28 (b) 35. (b) 42. (c)

Hints:
16.[(12,000 x 0.9) - 10,920 120 (gain because actual > expected)]

17.[(1.0x 0.8) = 1.25]

18.[(400 litres x 0.7) = 571.4 (571 litres)]
19.[22,040/ 1,900]
20.1400 + 3,400 400 200]
23.[1,440/60 x 10]
44. [90,000x 8,800 /25,000 = 31,680]
45.[90,000 x 100/1,000 = 9,000]
11.2 (1) Job (2) more than one (3) process (4). can (5) is not (6) Waste (7) less (8) Proce
credited (10) Normal (11) Normal (12) is (13) credited (14) abnormal loss (15) Ahn
Loss (16) is not (17) Abnormal (18) debited (19) Abnormal Gains (20) normal loss(21da
(22) is not (23) credited; debited (24) Joint (25) Joint (26) before (27) equal (28) crae
(29) Separable (30) by-product (31) equal (32) cannot (33) same (34) same(35) separa
(36) separated (37) Commom (38) prouct-wise (39) should be (40) should be
11.3 A: (1) (d), (2) (g), (3) - (a). (4) - (h), (5) - (e), (6) - (c), (7) - (b), (8) -()

B: (1) (e), (2) - (d), (3) (g), (4) (). (5) (h). (6) -

-(a)
11.4 True: 1,2, 4, 7, 8, 9, 10, 11, 12, 19, 22, 23
False 3, 5, 6, 13, 14, 15, 16, 17, 18, 20, 21, 24, 25, 26, 27, 28, 29

12. PRACTICAL PROBLEMS

12.1 ANSWER IN BRIEF [INTERNAL TESTS]

Q.1 6,500 kg of a product were manufactured in a period. There is a normal loss of 20%
of th
weight of material input. An abnormal gain of 4% of the material input occurred in the period. Hou
many kg of material (to the nearest kg) were input to production in the period?
[Ans.: 7,735
[Hint: Actual loss = 16% (20-4); Material input = 6,500 kg + (1 -0.16) 7,738 kg
Q.2:Costs incurred in a process totalled 61,600 for a period. 22,000 units
of finished
were manufactured, of which 440 units were rejected. This is the normal level of rejects produe
fort
process. Rejected units are sold for 1.80 per unit. What was the cost per unit
two decimal points) ?
ofgood outpul
[Ans.: 2.82] [Hint: {[61,600 (440 x 1.80)] +21,560) = 28
2.3 product passes from Process I and Process Il. Materials issued to Process Iamou
A
40,000, Labour 30,000 and manufacturing overheads were 7 Normal loss was
3%
27,000.
put as estimated. But 500 more units of output of Process Iwere lost due to the ness

orkers. Only 4,350 units of output were transferred to Process II. There were no carele>
put raw material issued to Process I were 5,000 units. You are required compute openin un
ansferred from Process I account. tne (CA-PCC Nov 200 o00
[Ans.: 787.0

Hint: 40,000+ 30,00+ 27,000 (500 x (97,000/4,850)=*87.00