Cost Accounting System - E-Notes - Udesh Regular - Group 1

7 Cost Accounting System
CHAPTER
Learning Outcomes
Differentiate between integrated and non-integrated systems of accounting.
Identify the ledgers maintained by financial as well as cost departments.
Understand the reasons for differences between financial and cost accounts.
Should be in a position to write the various journal entries for both integrated and non-integrated systems of
accounting.
Understand the reasons of difference in profit between financial accounts and cost accounts.
Understand the concept of reconciliation statement.
Understand the method of preparation of reconciliation statement.
Understand the concept of memorandum reconciliation account.
Understand the method of preparation of memorandum reconciliation account.
Understand the advantages, disadvantages and need of reconciliation statement.
Understand the method of preparation of accounts under cost books with the help of financial accounts and
reconciliation statement.
NON INTEGRATED ACCOUNTING SYSTEM

1. As on 31st March, 2017, the following balance existed in a firm's cost Ledger
Name of Account Dr. Cr.

Stores Ledger Control A/c 3,01,435 –
Work in Progress Control A/c 1,22,365 –
Finished Stock Ledger Control A/c 2,51,945 –
Manufacturing Overhead Control A/c – 10,525
Cost Ledger Control A/c – 6,65,220
Total 6,75,745 6,75,745

During the next three months the following items arose:
Finished product (at cost) 2,10,835

Manufacturing overhead incurred 91,510
Raw materials purchased 1,23,000
Factory wages 50,530
Indirect labour 21,665
Cost of sales 1,85,890
Material issued to production 1,27,315
Sales returned at cost 5,380
Material returned to suppliers 2,900
Manufacturing overhead charged to production 77,200

You are required to write up the accounts and schedule the balances, stating what each balance represents.

[SLC 2,94,220; WIP 1,66,575; Finished Stock 2,82,270; Manufacturing OH 25,450; COS 1,80,510; CLC 9,49,025]
2. The following balances were extracted from a company's ledger as on 31st December 2016

Raw materials control A/c 48,836 –
Work in progress control A/c 14,745 –
Finished stock ledger control A/c 21,980 –
Nominal ledger control A/c – 85,561
Total 85,561 85,561

Further transactions took place during the following quarter as follows
Direct wages 18,370
Factory overhead allocated to WIP 11,786
Goods Finished at cost 36,834
Raw materials purchased 22,422
Cost of goods sold 42,000
Raw materials issued to production 17,000
Raw materials credited by suppliers 1,000
Inventory audit raw material losses 1,300
WIP rejected (with no scrap value) 1,800
Customer's return (at cost) of finished goods 3,000

Prepare all the ledger accounts in cost ledger.
[SLC 51,958; WIP 23,267; Finished goods 19,814; COS 39,000; NLC 1,34,039]
3. A fire destroyed some accounting records of a company. You have been able to collect the following from thespoilt
papers/records and as a result of consultation with accounting staff in respect of January, 2017.

Incomplete Ledger Entries:
Materials Control A/c
Particulars ` Particulars `
To Balance b/d 32,000
Work-in-Progress Control A/c
To Balance b/d 9,200 By Finished Goods Control A/c 1,51,000
Payable (Creditors) A/c
To Balance c/d 19,200 By Balance b/d 16,400
196 Cost and Management Accounting P

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Manufacturing Overheads Control A/c
To Cost Ledger Control A/c 29,600
(Amount Spent)
Finished Goods Control A/c
To Balance b/d 24,000 To Balance c/d 30,000

Additional Information:
1. The cash-book showed that `89,200 have been paid to creditors for raw-material.
2. Ending inventory of work-in-progress included material `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 `10 per labour hour.
4. Overhead recovery rate was `4 per direct labour hour.

You are required to complete the above accounts in the cost ledger of the company.
Ans. Materials Control A/c
To Balance b/d 32,000 By WIP Ledger Control A/c 53,000
To Cost Ledger Control A/c (WN) (figure from WIP A/c)
(Purchases) 92,000 By Balance b/d 71,000
1,24,000 1,24,000
WIP Ledger Control A/c
To Balance b/d 9,200 By Finished Goods Control A/c 1,51,000
To Materials Control A/c (b.f.) 53,000 By Balance c/d:
To Wages Control A/c 70,000 Material ` 5,000
(7,000 hrs × `10) Labour (300 hrs × `10) `3,000
To Manufacturing OH Control A/c 28,000 Overheads (300 hrs × `4) `1,200 9,200
1,60,200 1,60,200
Manufacturing Overheads Control A/c
To Cost Ledger Control A/c 29,600 By WIP Ledger Control A/c 28,000
(7,000 hrs × `4)
By Costing P/L A/c 1,600
(Under-absorbed Overheads)
29,600 29,600
To Balance b/d 24,000 By Cost of Sales A/c (b.f.) 1,45,000
To Work-in-Progress Control A/c 1,51,000 By Balance c/d 30,000
1,75,000 1,75,000
P Cost Records Or Cost Accounting System 197

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Working note:
Payables (Creditors) A/c
To Cash or Bank 89,200 By Balance b/d 16,400
To Balance c/d 19,200 By Stores Ledger Control A/c 92,000
(Purchase/Balancing figure)
1,08,400 1,08,400
4. Acme Manufacturing Co. Ltd. opens the costing records, with the balances as on 1st July as follows:
(`) (`)
Material Control A/c 1,24,000
Work-in-Process Control A/c 62,500
Finished Goods Control A/c 1,24,000
Production Overhead Control A/c 8,400
Administrative Overhead Control A/c 12,000
Selling & Distribution Overhead Control A/c 6,250
Cost Ledger Control A/c 3, 13,750
3,25,150 3,25,150

The following are the transactions for the quarter ended 30th September:
(`)
Materials purchased 4,80,100
Materials issued to jobs 4,77,400
Materials to works maintenance 41,200
Materials to administrative office 3,400
Materials to sales department 7,200
Wages direct 1,49,300
Wages indirect 65,000
Transportation for indirect materials 8,400
Production overheads incurred 2,42,250
Absorbed production overheads 3,59, 100
Administrative overheads incurred 74,000
Administrative overheads allocated to production 52,900
Administrative overheads allocated to sales department 14,800
Selling & Distribution overheads incurred 64,200
Selling & Distribution overheads absorbed 82,000
Finished goods produced 9,58,400
Finished goods sold 9,77,300
Sales 14,43,000

Make up the various accounts as you envisage in the Cost Ledger and PREPARE a Trial Balance as at 30th September.

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Ans.
Cost Ledgers
Material Control A/c*
To Balance b/d 1,24,000 By Work-in-process Control A/c 4,77,400
To Cost Ledger Control 4,80,100 By Production OH Control A/c 41,200
By Admn. OH Control A/c 3,400
By S&D OH Control Ale 7,200
By Balance c/d 74,900
6,04,100 6,04,100

*Material Control A/c may also be written as Stores Ledger Control A/c
Wages Control A/c
To Cost Ledger Control A/c 2,14,300 By Work-in-process Control A/c 1,49,300
By Production OH Control A/c 65,500
2,14,300 2,14,300
Production Overhead Control A/c

To Balance b/d 8,400 By Work-in-process Control A/c 3,59,100
To Cost Ledger Control A/c:
– Transportation 8,400
– Production OH 2,42,250
To Wages Control A/c 65,000
To Material Control A/c 41,200 By Balance c/d 6,150
3,65,250 3,65,250
Administrative Overhead Control A/c

To Cost Ledger Control A/c 74,000 By Balance b/d 12,000
To Material Control A/c 3,400 By Finished Goods 52,900
To Balance c/d 2,300 By Cost of sales A/c 14,800
79,700 79,700
Work-in-Process Control A/c
To Balance b/d 62,500 By Finished goods Control A/c 9,58,400
To Material Control A/c 4,77,400
To Wages Control A/c 1,49,300
To Production OH Control A/c 3,59,100
Balance c/d 89,900
10,48,300 10,48,300

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To Balance b/d 1,24,000 By Cost of Sales A/c 9,77,300
To Administrative 52,900
Overhead Control A/c
To Work-in-process Control A/c 9,58,400 By Balance c/d 1,58,000
Control A/c
11,35,300 11,35,300
Selling and Distribution Overhead Control A/c
To Balance b/d 6,250 By Cost of Sales A/c 82,000
To Cost Ledger Control A/c 64,200
To Material Control A/c 7,200
To Balance c/d 4,350
82,000 82,000
Cost of Sales A/c
To Finished Goods Control A/c 9,77,300 By Costing P&L A/c 10,74,100
To Admn. OH Control A/c 14,800
To S&D OH Control A/c 82,000
10,74,100 10,74,100
Cost Ledger Control A/c
To Costing P&L A/c (Sales) 14,43,000 By Balance b/d 3,13,150
By Material Control A/c 4,80,100
By Wages Control A/c 2,14,300
(`1 ,49,300 + `65,000)
By Production OH Control A/c 2,50,650
(`8,400 +`2,42,250)
By Administrative OH A/c 74,000
By S&D OH Control A/c 64,200
To Balance c/d 3,22,300 By Costing P&L A/c 3,68,900
17,65,300 17,65,300
Costing Profit & Loss A/c
To Cost of sales A/c 10,74,100 By Cost Ledger Control A/c (sales) 14,43,000
To Cost Ledger Control A/c (profit) 3,68,900
(balancing figure)
14,43,000 14,43,000

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Trial Balance as at 30th September
Dr. (`) Cr. (`)

Material Control A/c 74,900
Production OH Control A/c 6,150
Administrative OH Control A/c 2,300
Selling & Distribution OH Control A/c 4,350
Work-in-process Control A/c 89,900
Finished Goods Control A/c 1,58,000
Cost Ledger Control A/c 3,22,300
3,28,950 3,28,950
5. The following balances were extracted from a company’s ledger as on 31st December 1997

Raw materials control A/c 48,836 –
Work in progress control A/c 14,745 –
Finished stock ledger control A/c 21,980 –
Cost ledger control A/c – 85,561
Total 85,561 85,561

Further transactions took place during the following quarter as follows
Direct wages 18,370

Factory overhead allocated to WIP 11,786
Goods finished at cost 36,834
Raw materials purchased 22,422
Cost of goods sold 42,000
Raw materials issued to production 17,000
Raw materials credited by suppliers 1,000
Inventory audit raw material losses 1,300

Prepare all the ledger accounts in cost ledger. [(10 Marks) Nov 1998]
Raw Material Control A/c
Particulars Amount Particulars Amount

To Bal b/d 48,836 By WIP A/c 17,000
To Cost Ledger Control A/c 22,422 By Cost Ledger Control A/c 1,000
By Cost Ledger Control A/c (Loss) 1,300
By Bal c/d 51,958
71,258 71,258
Wages Control A/c

To Cost Ledger Control A/c 18,370 By WIP A/c 18,370
18,370 18,370

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Factory Overheads Control A/c

To Cost Ledger Control A/c 11,786 By WIP A/c 11,786
11,786 11,786

To Bal b/d 14,745 By Finished Stock Control A/c 36,834
To Factory OH Control A/c 11,786 By Cost Ledger Control A/c
To Wages Control A/c 18,370 (Rejected) 1,800
To Raw Material Control A/c 17,000 By Bal c/d 23,267
61,901 61,901
Finished Stock Control A/c

To Bal b/d 21,980 By Cost of Sales 42,000
To Work-in-Progress Control A/c 36,834 By Bal c/d 19,814
To Cost of Sales (Return) 3,000
61,814 61,814
Cost of Sales A/c

To Finished Goods Control A/c 42,000 By Finished Goods Control A/c 3,000
By Bal c/d 39,000
42,000 42,000

To Raw Material Control A/c 1,000 By Bal b/d 85,561
(Returns) By Raw Material Control A/c 22,422
To Raw Materials Control A/c (Loss) 1,300 By Wages Control A/c 18,370
To WIP Control A/c (Rejected) 1,800 By Factory OH Control A/c 11,786
To Bal c/d 1,34,039
1,38,139 1,38,139
6. Pass journal entries in the cost books (non-integrated system) for the following transactions
(i) Issue of materials : Direct `5,50,000, Indirect `1,50,000
(ii) Allocation of wages : Direct `2,00,000, Indirect `40,000
(iii) Under/over absorbed overheads : Factory (over) `20,000
Administration (under) `10,000. [(8 Marks) Nov 2007]
Ans. Journal Entries
S. No. Entries Dr. Cr.

(i) Work-in-Progress Ledger Control A/c Dr. 5,50,000 –
Factory Overhead Control A/c Dr. 1,50,000 –
To Stock Ledger Control Account – 7,50,000
(Being issue of materials)

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(ii) Work-in-Progress Ledger Control A/c Dr. 2,00,000 –
Factory Overhead Control A/c Dr. 40,000 –
To Wages Control A/c – 2,40,000
(Being allocation of wages)
(iii) Factory Overhead Control A/c Dr. 20,000 –
To Costing P/L A/c – 20,000
(Being factory overhead over adjusted)
(iv) Costing P/L A/c Dr. 10,000 –
To Administrative O/H Control A/c – 10,000
(Being administration O/H under absorbed)
7. The following figures have been extracted from the cost records of a manufacturing unit:
Stores:
Opening balance 32,000
Purchases of materials 1,58,000
Transfer from work-in-progress 80,000
Issues to work-in-progress 1,60,000
Issues to repairs 20,000
Deficiencies found in stock-taking 6,000

Work-in-progress:
Direct wages applied 65,000
Overheads applied 2,40,000
Closing balance of WIP 45,000

Entire output is sold at a profit of 10% on actual cost from work-in-progress.
Wages incurred 70,000

Overhead incurred 2,50,000

Items not included in cost records:
Income from investment 10,000

Loss on sale of capital assets 20,000

Draw up store control account, Work-in-progress Control account, Costing Profit and Loss account, Profit and Loss
account and Reconciliation statement. [(13 Marks) May 2005]
Ans. Stores Ledger Control Account

To Balance b/d 32,000 By WIP Ledger Control A/c 1,60,000
To Cost Ledger Control A/c 1,58,000 By Work Overhead Control A/c 20,000
To Work in Progress Control A/c 80,000 By Costing P/L A/c 6,000
(assumed abnormal)
2,70,000 2,70,000

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Work in Progress Ledger Control Account

To Balance b/d 60,000 By Stores Control A/c 80,000
To Stores Ledger Control A/c 1,60,000 By Costing Profit and Loss A/c 4,00,000
To Direct Wages Control A/c 65,000 (i.e., cost of sales)
To Works Overhead Control A/c 2,40,000 By Balance c/d 45,000
5,25,000 5,25,000
Works Overhead Control Account

To Cost Ledger Control A/c 2,50,000 By WIP Ledger Control A/c 2,40,000
To Store Ledger Control A/c 20,000 By Costing Profit & Loss A/c 35,000
To Wages Control A/c 5,000 (under recovery)
2,75,000 2,75,000
Costing Profit & Loss Account

To WIP Control A/c 4,00,000 By Cost Ledger Control A/c 4,40,000
To Works Overhead Control A/c 35,000 (4,00,000 + 10%)
To Stores Ledger Control A/c 6,000 By Loss 1,000
4,41,000 4,41,000

Recording of transaction in financial books
Profit & Loss Account

To Opening stock: By Sales 4,40,000
Stores 32,000 By Closing stock:
WIP 60,000 92,000 Stores 84,000
To Purchases 1,58,000 WIP 45,000 1,29,000
To Wages incurred 70,000 By Income from investment 10,000
By Loss
To Overheads incurred 2,50,000 11,000
To Loss on sale of capital asset 20,000
5,90,000 5,90,000
Reconciliation statement
Particulars `
Loss as per Cost Accounts (1,000)
Add: Income from investment recorded in financial accounts 10,000
Less: Loss on sale of capital assets only (20,000)
Loss as per Financial Accounts (11,000)

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8. As of 31st March, 2008, the following balances existed in a firm’s cost ledger, which is maintained separately on a
double entry basis

Manufacturing Overhead Control A/c – 15,000
Total 7,00,000 7,00,000

During the next quarter, the following items arose
Finished Product (at cost) 2,25,000
Manufacturing overhead incurred 85,000
Raw material purchased 1,25,000
Factory wages 40,000
Indirect labour 20,000
Materials issued to production 1,35,000
Sales returned (at cost) 9,000
Materials returned to suppliers 13,000

You are required to prepare the Cost Ledger Control A/c, Stores Ledger Control A/c, Work-in-Progress Control A/c,
Finished Stock Ledger Control A/c, Manufacturing Overheads Control A/c, Wages Control A/c, Cost of Sales A/c and
the Trial Balance at the end of the quarter. [(15 Marks) May 2008]
Ans. Stores Ledger Control Account

To Balance b/d 3,00,000 By WIP Ledger Control A/c 1,35,000
To Cost Ledger Control A/c 1,25,000 (Materials issued)
(Materials purchased) By Cost Ledger Control A/c 13,000
(Materials returned to supplier)
By Balance c/d 2,77,000
4,25,000 4,25,000
Wages Control Account

(40,000 + 20,000) (Direct wages)
By Manufacturing OH Control A/c 20,000
(Indirect labour)
60,000 60,000

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Manufacturing Overhead Control Account

To Wages Control A/c 20,000 By Balance b/d 15,000
(Indirect labour) By WIP Ledger Control A/c 85,000
To Cost Ledger Control A/c 85,000 (OH charges to production)
(Overhead incurred) By Balance c/d 5,000
1,05,000 1,05,000

To Stores Ledger Control A/c 13,000 By Bal b/d 6,85,000
(Materials returned to suppliers) By Stores Ledger Control A/c 1,25,000
To Bal c/d 9,42,000 (Materials purchased)
By Manufacturing OH Control A/c 85,000
(Overhead incurred)
By Wages Control A/c 60,000
(40,000 + 20,000)
9,55,000 9,55,000
Work in Progress Control Account

To Balance b/d 1,50,000 By Finished Stock Control A/c 2,25,000
To Wages Control A/c (Direct wages) 40,000 (Finished product at cost)
To Stores Ledger Control A/c 1,35,000 By Balance c/d 1,85,000
(Materials issued)
To Manufacturing OH Control A/c 85,000
4,10,000 4,10,000
Finished Stock Ledger Control Account

To Balance b/d 2,50,000 By Cost of Sales A/c 1,75,000
To WIP Ledger Control A/c 2,25,000 By Balance c/d 3,09,000
(Finished product at cost)
To Cost of Sales A/c 9,000
(Sales return at cost)
4,84,000 4,84,000
Cost of Sales Account

To Finished Stock Control A/c 1,75,000 By Finished Stock Control A/c 9,000
1,75,000 1,75,000

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Trial Balance

Work in progress Ledger Control A/c 1,85,000 –
Manufacturing Overhead Control A/c 5,000 –
Cost of Sales A/c 1,66,000 –
Total 9,42,000 9,42,000
9. You are given the following information of the cost department of a manufacturing company

Stores:
Opening Balance 12,60,000

Purchases 67,20,000
Transfer from work-in-progress 33,60,000
Issue to work-in-progress 67,20,000
Issue to repairs and maintenance 8,40,000
Shortage found in stock taking 2,52,000
(Shortage in stock taking is treated as normal loss)
Work-in-progress:
Opening Balance 25,20,000

Direct wages applied 25,20,000
Overhead applied 90,08,000
Closing Balance 15,20,000

Finished products: Entire output is sold at a profit of 12% on actual cost from work-in-progress.

Other information:
Wages incurred 29,40,000

Income from investment 4,00,000
Loss on sale of fixed assets 8,40,000
You are required to prepare:

(i) Stores control account; (ii) Work-in-progress control account;
(iii) Costing profit and loss account; (iv) Profit and loss account and
(v) Reconciliation statement [(12 marks) May 2011]
Ans. Stores Ledger Control A/c

To Balance b/d 12,60,000 By WIP Ledger Control A/c 67,20,000
To Cost Ledger Control A/c 67,20,000 By Overhead Control A/c 8,40,000
To WIP Ledger Control A/c 33,60,000 By Overhead Control A/c 2,52,000
1,13,40,000 1,13,40,000

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To Balance b/d 25,20,000 By Stores Ledger Control A/c 33,60,000
To Stores Ledger Control A/c 67,20,000 By Costing P & L A/c (b.f.) 1,58,88,000
To Wages Control A/c 25,20,000 By Balance c/d 15,20,000
To Overhead Control A/c 90,08,000
2,07,68,000 2,07,68,000
Costing P & L A/c

To WIP Ledger Control A/c 1,58,88,000 By Cost Ledger Control A/c 1,77,94,560
To Overhead Control A/c 20,54,000 (Sales: 1,58,88,000 + 12%)
By Cost Ledger Control A/c (Net Loss) 1,47,440
1,79,42,000 1,79,42,000

To Stores Ledger Control A/c 8,40,000 By Costing P & L A/c 20,54,000
To Stores Ledger Control A/c 2,52,000
1,10,62,000 1,10,62,000
Reconciliation Statement between Costing Profit and Financial Profit
Loss as per cost records 1,47,440
Add: Loss on sale of fixed asset 8,40,000
Less: Income from investments 4,00,000
Loss as per financial records 5,87,440
Financial P & L A/c

To Opening Stock: By Sales 1,77,94,560
Raw Material 12,60,000 By Closing Stock:
WIP 25,20,000 Raw Material 35,28,000
To Purchased of Raw Materials 67,20,000 WIP 15,20,000
To Wages Incurred 29,40,000 By Income from Investments 4,00,000
To Overhead Incurred 95,50,000 By Net Loss 5,87,440
To Loss on Sale of Fixed Asset 8,40,000
2,38,30,000 2,38,30,000
10. The following information has been extracted from the cost records of a manufacturing company
Stores:
Purchase 48,000
Transfer from WIP 24,000
Issue to work-in-process 48,000

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Issue for repairs 6,000
Deficiency found in stock 1,800
Work-in-process:
Direct wages applied 18,000
Overhead charged 72,000
Closing balance 12,000

Finished Production: Entire production is sold at a profit of 10% on cost from Work-in-process.
Wages paid 21,000
Overhead incurred 75,000
Draw the Stores Ledger Control A/c, Work-in-Progress Control A/c, Overheads Control A/c and Costing Profit and
Loss A/c. [(8 marks) Nov 2011/May 2017]
To Balance b/d 9,000 By WIP Ledger Control A/c 48,000
To Cost Ledger Control A/c 48,000 By Overhead Control A/c 6,000
To WIP Ledger Control A/c 24,000 By Overhead Control A/c 1,800
(Deficiency assumed normal)
81,000 81,000

To Opening Balance 18,000 By Stores Ledger Control A/c 24,000
To Stores Ledger Control A/c 48,000 By Costing Profit & Loss A/c 1,20,000
To Wages Control A/c 18,000 By Balance c/d 12,000
To Overhead Control A/c 72,000
1,56,000 1,56,000

To Stores Ledger Control A/c 6,000 By Costing P & L A/c 13,800
To Stores Ledger Control A/c 1,800
85,800 85,800
Costing P/L A/c

To WIP Ledger Control A/c 1,20,000 By Cost Ledger Control A/c 1,32,000
To Overhead Control A/c 13,800 (1,20,000 + 10%)
By Cost Ledger Control A/c (Loss) 1,800
1,33,800 1,33,800
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Wages Control A/c
By Overhead Control A/c 3,000
21,000 21,000
Note: This question is solved on the basis of Non Integrated Method of accounting, alternatively student can solve
this problem by using Integrated Method of accounting.
11. Following information has been extracted from the cost records of XYZ Pvt. Ltd:
Stores:
Purchase 2,88,000
Transfer from WIP 1,44,000
Issue to work-in-process 2,88,000
Issue for repairs 36,000
Deficiency found in stock 10,800

Work-in-process:
Opening balance 1,08,000

Direct wages applied 1,08,000
Overhead charged 4,32,000
Closing balance 72,000

Finished Production:

Entire production is sold at a profit of 15% on cost from Work-in-process.
Wages paid 1,26,000

Draw the Stores Ledger Control A/c, Work-in-Progress Control A/c, Overheads Control A/c and Costing Profit and
Loss A/c. [(8 marks) Nov 2014]

To Balance b/d 54,000 By WIP Ledger Control A/c 2,88,000
To Cost Ledger Control A/c 2,88,000 By Overhead Control A/c 36,000
To WIP Ledger Control A/c 1,44,000 By Overhead Control A/c 10,800
(Deficiency assumed normal)
4,86,000 4,86,000

To Opening balance 1,08,000 By Stores Ledger Control A/c 1,44,000
To Stores Ledger Control A/c 2,88,000 By Costing Profit & Loss A/c 7,20,000
To Wages Control A/c 1,08,000 By Balance c/d 72,000
To Overhead Control A/c 4,32,000
9,36,000 9,36,000

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To Stores Ledger Control A/c 36,000 By Costing P & L A/c 82,800
5,14,800 5,14,800
Costing P/L A/c

To WIP Ledger Control A/c 7,20,000 By Cost Ledger Control A/c 8,28,000
To Overhead Control A/c 82,800 (Sales: 7,20,000 + 15%)
To Cost Ledger Control A/c (Profit) 25,200
8,28,000 8,28,000
Wages Control A/c

1,26,000 1,26,000
12. The following information is available from a company's records for March, 2016
(a) Opening Balance of Creditors Account `25,000
(b) Closing Balance of Creditors Account `40,000
(c) Payment Made to Creditors `5,80,000
(d) Opening Balance of Stores Ledger Control Account `40,000
(e) Closing Balance of Stores Ledger Control Account `65,000
(f) Wages paid (for 8,000 hours) 20% relate to indirect workers `4,00,000
(g) Various indirect expenses incurred `60,000
(h) Opening balance of WIP control account `50,000
(i) Inventory of WIP at the end includes:
Material worth `35,000
Labour hours booked 400 hours
(j) Budgeted:
Overhead cost `20,80,000
Labour hours `1,04,000
(a) Factory overhead is charged to production at budgeted rate based on direct labour hours.

You are required to prepare Creditors A/c, Stores Ledger Control A/c, WIP Control A/c, Wages Control A/c and
Factory Overhead Control A/c. [(8 marks) May 2016]
Ans. Creditors A/c
To Cash or Bank A/c 5,80,000 By Balance b/d 25,000
To Balance c/d 40,000 By Stores Ledger Control A/c 5,95,000
(Balancing figure)
6,20,000 6,20,000

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Stores Ledger Control A/c
To Balance b/d 40,000 By Work-in-Progress Control A/c 5,70,000
To Creditors A/c 5,95,000 (Balancing figure)
(Purchase: Figure from creditor A/c) By Balance b/d 65,000
6,35,000 6,35,000
Work-in-Progress Ledger Control A/c
To Balance b/d 50,000 By Finished Goods Control A/c (b.f.) 10,05,000
To Stores Ledger Control A/c 5,70,000 By Balance c/d:
To Wages Control A/c 3,20,000 Material `35,000
To Factory Overhead Control A/c 1,28,000 Labour (400 hrs × `50) `20,000
Overheads (400 hrs × `20) `8,000 63,000
10,68,000 10,68,000
Wages Control A/c
To Bank A/c 4,00,000 By WIP Ledger Control A/c 3,20,000
(8,000 hours × 80% × 50)
By Factory Overhead Control A/c 80,000
(8,000 hours × 20% × 50)
4,00,000 4,00,000
Factory Overhead Control A/c
To Bank A/c 60,000 By WIP Ledger Control A/c 1,28,000
To Wages Control A/c 80,000 (6,400 hrs × `20)
By Costing P/L A/c 12,000
(Under-absorbed Overheads)
1,40,000 1,40,000

Working notes:
1. Direct Labour Hour Rate = Labour Cost ÷ Labour Hour = `4,00,000 ÷ 8,000 hours = `50 per hour
2. Factory Overhead Rate = Budgeted Factory Overheads ÷ Budgeted Labour Hours
= `20,80,000 ÷ 1,04,000 = `20 per hour
13. The following balances were extracted from a company's ledger as on 30th June 2018

Raw materials control A/c 2,82,450 –
Work in progress control A/c 2,38,300 –
Finished stock control A/c 3,92,500 –
General ledger adjustment A/c – 9,13,250
Total 9,13,250 9,13,250

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The following transactions took place during the quarter ended 30th September, 2018
Factory overhead - allocated to WIP 1,36,350
Goods finished at - cost 13,76,200
Direct wages - allocated to WIP 2,56,800
Cost of goods sold 14,56,500
Raw materials - issued to production 13,60,430
Raw materials - credited by suppliers 27,200
Raw material losses – inventory audit 6,000

You are required to prepare:
1. Raw material control A/c
2. Work-in-progress control A/c
3. Finished stock control A/c
4. General ledger adjustment A/c [(10 Marks) Nov 2018]
Ans. Raw Material Control A/c

To Balance b/d 2,82,450 By WIP A/c 13,60,430
To General Ledger Adjustment A/c 12,43,810 By General Ledger Adjustment A/c 27,200
By General Ledger Adjustment A/c 6,000
(Loss)
By Balance c/d (Bal. figure) 1,32,630
15,26,260 15,26,260

To Balance b/d 2,38,300 By Finished Stock Control A/c 13,76,200
To Raw Material Control A/c 13,60,430 By General Ledger Adjustment A/c 12,300
To Wages Control A/c 2,56,800 (Rejected)
To Factory OH Control A/c 1,36,350 By Balance c/d (Bal. figure) 6,03,380
19,91,880 19,91,880
Finished Stock Control A/c

To Balance b/d 3,92,500 By Cost of Sales 14,56,500
To Work-in-Progress Control A/c 13,76,200 By Balance c/d (Bal. figure) 3,58,100
To Cost of Sales (Return) 45,900
18,14,600 18,14,600

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General Ledger Adjustment A/c

To Raw Material Control A/c 27,200 By Balance b/d 9,13,250
(Returns) By Raw Material Control A/c 12,43,810
To Raw Materials Control A/c (Loss) 6,000 By Wages Control A/c 2,56,800
To WIP Control A/c (Rejected) 12,300 By Factory OH Control A/c 1,36,350
To Balance c/d 25,04,710
25,50,210 25,50,210
14. Journalise the following transactions in the cost books under non-integrated system of accounting
(a) Credit purchase of material `27,000
(b) Manufacturing overheads charged to production `6,000
(c) Selling and distribution overheads recovered from Sales `4,000
(d) Indirect wages incurred `8,000
(e) Material returned from production to stores `9,000
[(5 Marks) Nov 2019]

(a) Store Ledger Control A/c Dr. 27,000 –
To Cost Ledger Control A/c – 27,000
(b) Work-in-Progress Ledger Control A/c Dr. 6,000 –
To Manufacturing Overhead Control A/c – 6,000
(c) Cost of Sales A/c Dr. 4,000 –
To Selling and Distribution Overhead Control A/c – 4,000
(d) Wages Control A/c Dr. 8,000 –
To Cost Ledger Control A/c – 8,000
(e) Store Ledger Control A/c Dr. 9,000 –
To Work-in-Progress Ledger Control A/c – 9,000
INTEGRATED ACCOUNTING SYSTEM

15. In the absence of the chief Accountants you have been asked to prepare a month's cost accounts for a company which
operates a batch costing system fully integrated with the financial accounts. The following relevant information is
provided to you

Balances at the beginning of the month:
Stores ledger control account 25,000

Work in progress control account 20,000
Finished goods control account 35,000
Prepaid production overheads brought forward from previous month 3,000

Transactions during the month:
Materials purchased 75,000

Materials Issued:
To Production 30,000
To Factory Maintenance 4,000 34,000

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Materials transferred between batches 5,000
Total wages paid:
To Direct workers 25,000
To Indirect workers 5,000 30,000
Direct wages charged to batches 20,000
Recorded non-productive time of direct workers 5,000
Selling and distribution overheads incurred 6,000
Other production overheads incurred 12,000
Sales 1,00,000
Cost of finished goods sold 80,000
Cost of goods completed and transferred into Finished goods during the month 65,000
Physical value of work in progress at the end of month 40,000

The production overhead absorption rate is 150% of direct wages charged to work in progress.

Prepare the following accounts for the month:
(a) Stores ledger control account.
(b) Work in progress control account.
(c) Finished goods control account.
(d) Production overheads control account.
(e) Profit and loss account.
[(a) `66,000 (b) ` 40,000 (c) `20,000 (d) Over absorption taken to P/L A/c `1,000 (e) `20,000]
16. Bangalore Petrochemicals Co. keeps books on integrated accounting system. The following balance appears in the
books as on 1st January, 2016.
Particulars Dr. Cr.

Stores control A/c 18,000 –
Work-in-progress A/c 17,000 –
Finished goods A/c 13,000 –
Bank A/c 10,000 –
Creditors A/c - 8,000
Fixed assets A/c 55,000 –
Debtors A/c 12,000 –
Share Capital A/c – 80,000
Depreciation provision A/c – 5,000
Profit and loss A/c – 32,000
Total 1,25,000 1,25,000

Transactions for the year ended 31st December 2016 were as given below:
Wages-direct 87,000
Wages-indirect 5,000 92,000
Purchase of materials (on credit) 1,00,000
Materials for repairs 2,000
Goods finished during the year (at cost) 2,15,000
Sales (credit) 3,00,000

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Cost of goods sold 2,20,000
Production overhead absorbed 48,000
Production overhead incurred 40,000
Administration overhead incurred 12,000
Selling overhead incurred 14,000
Payments of creditors 1,01,000
Payments of debtors 2,90,000
Depreciation of machinery 1,300
Prepaid rent (included in factory overheads) 300

Write up accounts in the integrated ledger and prepare in trial balance.
[SLC 6,000; WIP 47,000; Finished goods: 20,000; Net Profit 66,000; Debtors 22,000;
Creditor 7,000; Cash 41,000, Trial Balance 1,91,300]
17. The following incomplete accounts are furnished to you for the month ended 31st October, 2017
Creditors for Purchases Account
01.10.17 By Balance 30,000

Stores Control Account
01.10.17 To Balance 54,000

Factory Overheads Control Account
01.10.17 Total debits 45,000

Work in Progress Control Account
01.10.17 To Balance 6,000

Finished Goods Control Account
01.10.17 To Balance 75,000

Additional information:
(i) The factory overheads are applied by using a budgeted rate based on direct labour hours. The budget for
overheads for 2017 is ` 6,75,000 and the budget of direct labour hours is 4,50,000.
(ii) The balance in the account of creditors for purchases on 31.10.17 is ` 15,000 and the payments made to
creditors in October, 2017 amount to ` 1,05,000.
(iii) The finished goods inventory as on 31st October, 2017 is ` 66,000.
(iv) The cost of goods sold during the month was ` 1,95,000.
(v) On 31st October, 2017 there was only one unfinished job in the factory. The cost records show that ` 3,000
(1,200 direct labour hours) of direct labour cost and ` 6,000 of direct material cost had been charged.
(vi) A total of 28,200 direct labour hours were worked in October, 2017. All factory workers earn same rate of pay.
(vii) All actual factory overheads incurred in October, 2017 have been posted.
You are required to find:
(a) Materials purchased during October, 2017.
(b) Cost of goods completed in October, 2017.
(c) Overheads applied to production in October, 2017.
(d) Balance of work in progress on 31st October, 2017.
(e) Direct materials consumed during October, 2017.
(f) Balance of stores control account on 31st October, 2017.
(g) Over absorbed or under absorbed overheads for October, 2017.
[(a) 90,000 (b) 1,86,000 (c) 42,300 (d) 10,800 (e) 78,000 (f) 66,000 (g) 2,700 under-recovered]

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18. Journalise the following transactions assuming that cost and financial transactions are integrated:
(`)
Direct materials issued to production 1,50,000
Wages paid (30% indirect) 1,20,000
Wages charged to production 84,000
Manufacturing expenses incurred 84,000
Selling and distribution costs 20,000
Finished products (at cost) 2,00,000
Sales 2,90,000
Closing stock Nil
Receipts from debtors 69,000
Payments to creditors 1,10,000
Ans. Journal entries are as follows:
Dr. (`) Cr. (`)

Stores Ledger Control A/c Dr. 2,00,000
To Payables (Creditors)/ Bank A/c 2,00,000
(Material Purchased)
Work-in-Process Control A/c Dr. 1,50,000
(Materials issued to production)
Wages Control A/c Dr. 1,20,000
To Bank A/c 1,20,000
(Wages paid)
Factory Overhead Control A/c Dr. 36,000
(30% of wages paid being indirect charged to overhead)
Work-in-Process Control A/c Dr. 84,000
(Direct wages charged to production)
To Bank A/c 84,000
(Manufacturing overhead incurred)
Work-in-Process Control A/c Dr. 92,000
To Factory Overhead Control A/c 92,000
(Manufacturing overhead charged to production)
Selling & Distribution Overhead Control A/c Dr. 20,000
To Bank A/c 20,000
(Selling & distribution costs incurred)

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Finished Goods Control A/c Dr. 2,00,000
To Work-in-Process Control A/c 2,00,000
(Cost of finished goods)
Cost of Sales A/c Dr. 2,20,000
To Finished Goods Control A/c 2,00,000
To Selling and Distribution Control A/c 20,000
(Costs of sales)
Receivables (Debtors)/ Bank A/c Dr. 2,90,000
To Sales A/c 2,90,000
(Finished goods sold)
Bank A/c Dr. 69,000
To Receivables (Debtors) A/c 69,000
(Receipts from receivables)
Payables (Creditors) A/c Dr. 1,10,000
(Payment made to payables)
19. BPR Limited keeps books on integrated accounting system. The following balances appear in the books as on
April 1, 2002.

Stores Ledger Control A/c 40,950 –
Work in Progress Control A/c 38,675 –
Finished Stock Ledger Control A/c 52,325 –
Bank A/c – 22,750
Creditors A/c – 18,200
Fixed Assets A/c 1,47,875 –
Share Capital A/c – 1,82,000
Provision for Depreciation A/c – 11,375
Provision for Doubtful Debts A/c – 3,725
Production Overheads Outstanding A/c – 6,250
Prepaid Administration Overheads A/c 9,975 –
Profit & Loss A/c – 72,800
Total 3,17,100 3,17,100

The transactions for the year ended March 31, 2003 were as given below
Direct wages 1,97,925

Indirect wages 11,375 2,09,300
Purchase of materials (on credit) 2,27,500
Materials issued for repairs 4,550
Goods finished during the year (at cost) 4,89,125
Credit Sales 6,82,500

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Cost of Goods sold 5,00,500
Production overheads absorbed 1,09,200
Production overheads paid during the year 91,000
Production overheads outstanding at the end of year 7,775
Administration overheads paid during the year 27,300
Selling overheads incurred 31,850
Payment to creditors 2,29,775
Payment received from debtors 6,59,750
Depreciation of machinery 14,789
Administration overheads outstanding at the end of year 2,225
Provision for doubtful debts at the end of the year 4,590

Write up accounts in the integrated ledger of BPR Limited and prepare a Trial Balance. [(10 Marks) Nov 2003]

To Bal b/d 40,950 By WIP Ledger Control A/c 2,50,250
To Creditors 2,27,500 By Production Overhead Control A/c 4,550
By Bal c/d 13,650
2,68,450 2,68,450
Wages Control A/c

To Bank A/c (1,97,925 + 11,375) 2,09,300 By WIP Ledger Control A/c 1,97,925
By Production Overhead Control A/c 11,375
2,09,300 2,09,300
Production Overhead Control A/c

To Stores Ledger Control A/c 4,550 By WIP Ledger Control A/c 1,09,200
To Wages Control A/c 11,375 By Profit & Loss A/c 14,039
To Bank A/c (91,000 – 6,250) 84,750 (Under recovery)
To Production OH Outstanding 7,775
To Provision for Depreciation 14,789
1,23,239 1,23,239
Work-in-Progress Ledger Control A/c

To Bal b/d 38,675 By Finished Goods Control A/c 4,89,125
To Production Overhead Control A/c 1,09,200 By Bal c/d 1,06,925
5,96,050 5,96,050

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Administration Overheads Control A/c

To Prepaid Administration OH A/c 9,975 By Finished Goods Control A/c 39,500
To Bank A/c 27,300
To Admin OH Outstanding A/c 2,225
39,500 39,500

To Balance b/d 52,325 By Cost of Sales A/c 5,00,500
To WIP Ledger Control A/c 4,89,125 By Balance c/d 80,450
To Administration OH Control A/c 39,500
5,80,950 5,80,950
Selling Overheads Control A/c

To Bank A/c 31,850 By Cost of Sales A/c 31850
31,850 31,850
Cost of Sales A/c

To Finished Goods Control A/c 5,00,500 By Sales A/c 5,32,350
To Selling Overhead A/c 31,850
5,32,350 5,32,350
Sales A/c
To Cost of sales A/c 5,32,350 By Debtors A/c 6,82,500
To Profit & Loss A/c 1,50,150
6,82,500 6,82,500
Production Overheads Outstanding A/c
To Bank A/c 6,250 By Balance b/d 6,250
To Balance c/d 7,775 By Production overhead A/c 7,775
14,025 14,025
Prepaid Administration Overheads A/c
To Balance b/d 9,975 By Administration overhead A/c 9,975
9,975 9,975
Provision for Depreciation A/c
By Production overhead A/c 14,789
26,164 26,164
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Provision for Doubtful Debts A/c
By Profit & Loss A/c 865
4,590 4,590
Debtors A/c
To Balance b/d 27,300 By Bank A/c 6,59,750
To Sales A/c 6,82,500 By Balance c/d 50,050
7,09,800 7,09,800
Profit & Loss A/c
To Provision for doubtful debts 865 By Balance b/d 72,800
To Production overhead 14,039 By Sales A/c 1,50,150
To Balance c/d 2,08,046
2,22,950 2,22,950
Creditors A/c
To Bank 2,29,775 By Balance b/d 18,200
To Balance c/d 15,925 By Production overhead A/c 2,27,500
2,45,700 2,45,700
Bank A/c

To Debtors A/c 6,59,750 By Balance b/d 22,750
By Direct wages 1,97,925
By Indirect wages 11,375
By Production overhead A/c 91,000
(84,750 + 6,250)
By Administration overhead A/c 27,300
By Selling overhead A/c 31,850
By Creditors A/c 2,29,775
6,59,750 6,59,750
Trial Balance
(As on March 31st 2003)

Stores Ledger Control A/c 13,650 –
Finished Stock Ledger Control A/c 80,450 –
Bank A/c 47,775 –
Creditors A/c – 15,925

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Fixed Assets A/c 1,47,875 –
Share Capital A/c – 1,82,000
Provision for Depreciation A/c – 26,164
Provision for Doubtful Debts A/c – 4,590
Factory Overheads Outstanding A/c – 7,775
Administration Overhead Outstanding A/c – 2,225
Profit & Loss A/c – 2,08,046
Total 4,46,725 4,46,725
20. Journalise the following transactions assuming cost and financial accounts are integrated
(i) Materials issued:
Direct `3,25,000
Indirect `1,15,000
(ii) Allocation of wages (25% indirect) `6,50,000
(iii) Under/Over absorbed overheads:
Factory (Over) `2,50,000
Administration (Under) `1,75,000
(iv) Payment to Sundry Creditors `1,50,000
(v) Collection from Sundry Debtors `2,00,000
[(5 Marks) Nov 2013]

(i) Work-in-Progress Ledger Control A/c Dr. 3,25,000 –
To Stores Ledger Control A/c – 4,40,000
(Being issue of direct and indirect materials)
(ii) Work-in-Progress Ledger Control A/c Dr. 4,87,500 –
To Wages Control A/c – 6,50,000
(Being allocation of direct and indirect wages)
(iii) Factory Overhead Control A/c Dr. 2,50,000 –
To Costing P/L A/c – 2,50,000
(Being factory overhead over absorbed)
Costing P/L A/c Dr. 1,75,000 –
To Administration Overhead Control A/c – 1,75,000
(Being administration overhead under absorbed)
(iv) Sundry Creditors Dr. 1,50,000 –
To Cash A/c – 1,50,000
( Being payments made to sundry creditors)
(v) Cash A/c Dr. 2,00,000 –
To Sundry Debtors – 2,00,000
( Being collection received from sundry debtors)

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21. Dutta Enterprises operates an Integral system of accounting. You are required to PASS the Journal Entries for the
following transactions that took place for the year ended 31st March.

(Narrations are not required.)
(`)
Raw materials purchased (50% on Credit) 6,00,000
Wages paid (50% Direct) 2,00,000
Wages charged to production 1,00,000
Factory overheads incurred 80,000
Factory overheads charged to production 1,00,000
Selling and distribution overheads incurred 40,000
Finished goods at cost 5,00,000
Sales (50% Credit) 7,50,000
Closing stock Nil
Receipts from debtors 2,00,000
Payments to creditors 2,00,000
Ans. Journal entries are as follows:
Dr. Cr.
Stores Ledger Control A/c Dr. 6,00,000
To Payables (Creditors) A/c 3,00,000
To Cash or Bank 3,00,000
Wages Control A/c Dr. 2,00,000
Factory Overhead Control A/c Dr. 1,00,000
Work-in -Process Control A/c Dr. 1,00,000
To Bank A/c 80,000
To Factory Overhead Control A/c 1,00,000
Selling and Dist. Overhead Control A/c Dr. 40,000
To Bank A/c 40,000
Finished Goods Control A/c Dr. 5,00,000
To Work-in-Process Control A/c 5,00,000
Cost of Sales A/c. Dr. 5,40,000
To Finished Goods Control A/c 5,00,000
To Selling and Distribution Control A/c 40,000

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Receivables (Debtors) A/c Dr. 3,75,000
Bank or Cash A/c Dr. 3,75,000
To Sales A/c 7,50,000
Bank A/c Dr. 2,00,000
To Receivables (Debtors) A/c 2,00,000
Payables (Creditors) A/c Dr. 2,00,000
22. The following figures are extracted from the Trial Balance of Go-getter Co. on 31st March:
Dr. (`) Cr. (`)

Inventories:
Finished Stock 80,000
Raw Materials 1,40,000
Work-in-Process 2,00,000
Office Appliances 17,400
Plant & Machinery 4,60,500
Building 2,00,000
Sales 7,68,000
Sales Return and Rebates 14,000
Materials Purchased 3,20,000
Freight incurred on Materials 16,000
Purchase Returns 4,800
Direct employee cost 1,60,000
Indirect employee cost 18,000
Factory Supervision 10,000
Repairs and factory up-keeping expenses 14,000
Heat, Light and Power 65,000
Rates and Taxes 6,.00
Miscellaneous Factory Expenses 18,700
Sales Commission 33,600
Sales Travelling 11,000
Sales Promotion 22,500
Distribution Deptt.-Salaries and Expenses 18,000
Office Salaries and Expenses 8,600
Interest on Borrowed Funds 2,000

Further details are available as follows:
(i) Closing Inventories:
Finished Goods 1,15,000
Raw Materials 1,80,000
Work-in-Process 1,92,000
(ii) Outstanding expenses on:
Direct employee cost 8,000
Indirect employee cost 1,200
Interest on Borrowed Funds 2,000

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(iii) Depreciation to be provided on:
Office Appliances 5%
Plant and Machinery 10%
Buildings 4%
(iv) Distribution of the following costs:
Heat, Light and Power to Factory, Office and Distribution in the ratio 8 : 1 : 1.
Rates and Taxes two-thirds to Factory and one-third to Office.
Depreciation on Buildings to Factory, Office and Selling in the ratio 8: 1 : 1.
With the help of the above information, you are required to prepare a condensed Profit and Loss Statement of Go-
getter Co. for the year ended 31st March along with supporting schedules of:
(i) Cost of Sales.
(ii) Selling and Distribution Expenses.
(iii) Administration Expenses.
Ans. Profit and Loss Statement of Go-getter Company for the year ended 31st March
` `
Gross Sales 7,68,000
Less: Returns and rebates (14,000) 7,54,000
Less: Cost of Sales [Refer to Schedule (i)] (7,14,020)
Net Operating Profit 39,980
Less: Interest on borrowed funds (4,000)
(2,000 + 2,000)
Net Profit 35,980
(i) Schedule of Cost of Sales
` `
Raw Material (Inventory opening balance) 1,40,000
Add: Material Purchased 3,20,000
Add: Freight on Material 16,000
Less: Purchase Returns (4,800) 3,31,200
4,71,200
Less: Closing Raw Material Inventory (1 ,80,000)
Materials consumed in Production 2,91,200
Direct employee cost (`1,60,000 + `8,000) 1,68,000
Prime Cost 4,59,200
Factory Overheads:
Indirect employee cost (`18,000 + `1,200) 19,200
Factory Supervision 10,000
Repairs and factory up-keeping expenses 14,000
Heat, Light and Power (`65,000 × 8/10) 52,000
Rates and Taxes (`6,300 × 2/3rd) 4,200
Miscellaneous Factory Expenses 18,700
Depreciation of Plant (10% of 4,60,500) 46,050
Depreciation of Buildings (4% of `2,00,000 × 8/10) 6,400 1,70,550
Gross Works Cost 6,29,750

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Add: Opening Work-in-Process inventory 2,00,000
Less: Closing Work-in-Process inventory (1 ,92,000)
Cost of production 6,37,750
Add: Opening Finished Goods inventory 80,000
Less: Closing Finished Goods inventory (1, 15,000)
Cost of Goods Sold 6,02,750
Add: Administration Expenses [See Schedule (iii)] 18,870
Add: Selling and Distribution Expenses [See Schedule (ii)] 92,400
Cost of Sales 7,14,020
(ii) Schedule of Selling and Distribution Expenses
(`)
Sales Commission 33,600
Sales Travelling 11,000
Sales Promotion 22,500
Distribution Deptt.— Salaries and Expenses 18,000
Depreciation of Buildings 800
92,400
(iii) Schedule of Administration Expenses
(`)
Office Salaries and Expenses 8,600
Depreciation of Office Appliances 870
Depreciation of Buildings 800
Rates and Taxes 2,100
18,870
RECONCILIATION OF COST AND FINANCIAL ACCOUNTS

23. During the year ended 31st March, 2017, the profit of a company stood at `36,450 as per financial records. The cost
books however showed a profit of `51,950 for the same period.

Prepare a statement reconciling the profit as per cost records with the profit as per financial records.
(a) Opening stock overstated in cost accounts 3,500
(b) Closing stock understated in cost accounts 4,600
(c) Factory overheads under recovered in cost accounts 2,500
(d) Administration expenses over recovered in cost accounts 750
(e) Selling and distribution expenses under recovered in cost accounts 1,650
(f) Depreciation over recovered in cost accounts 1,500
(g) Interest on investment not included cost accounts 5,000
(h) Obsolescence loss in respect of machineries charged in financial accounts 2,450
(i) Income tax provided in financial accounts 25,000
(j) Bank interest credited in financial accounts 1,500
(k) Stores adjustments (debit in financial book) 750

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Ans. Reconciliation Statement
Particulars Amount Amount
Profit as per Cost Books 51,950
Add: Opening stock overstated 3,500
Closing stock understated 4,600
Administration expenses over recovered 750
Depreciation over recovered 1,500
Interest on investment 5,000
Bank interest credited 1,500 16,850
Less: Factory overheads under recovered 2,500
Selling and distribution expenses under recovered 1,650
Obsolescence loss 2,450
Income tax provided 25,000
Stores adjustment (debit in financial book) 750 (32,350)
Profit as per Financial Books 36,450
24. M/s. H.K. Piano Company showed a net loss of `4,16,000 as per their financial accounts for the year ended 31st March,
2017. The cost accounts, however, disclosed a net loss of `3,28,000 for the same period. The following information
was revealed as a result of scrutiny of the figures of both the sets of books:
1. Factory overheads under recovered 6,000
2. Administration overheads over recovered 4,000
3. Depreciation charged in financial accounts 1,20,000
4. Depreciation recovered in costs 1,30,000
5. Interest on investment not included costs 20,000
6. Income-tax provided 1,20,000
7. Transfer fees (credit in financial books) 2,000
8. Stores adjustments (credit in financial book) 2,000

Prepare a memorandum reconciliation account.
Ans. Memorandum Reconciliation Account

To Net loss as per Cost A/c 3,28,000 By Admin. OH over recovered 4,000
To Factory OH under recovered 6,000 By Depreciation over recovered 10,000
(1,30,000 – 1,20,000)
To Income Tax 1,20,000 By Interest on investment 20,000
By Transfer fees 2,000
By Stores adjustment 2,000
By Net loss as per financial A/c 4,16,000
4,54,000 4,54,000

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25. M/s Sellwell Ltd. has furnished you the following information from the financial books for the year ended
31st December 2016
M/s Sellwell Ltd.
Profit & Loss Account
(For the year ended 31st December 2016)

To Opening finished goods 8,750 By Sales (10,250 units) 3,58,750
(500 units × `17.50 per unit) By Closing finished goods 6,250
(250 units × `25 per unit)
To Direct Materials Consumed 1,30,000
To Direct Wages 75,000
To Gross profit 1,51,250
3,65,000 3,65,000
To Factory overheads 47,375 By Gross profit 1,51,250
To Administration overheads 53,000 By Interest 125
To Selling expenses 27,500 By Rent received 5,000
To Bad debts 2,000
To Preliminary expenses 2,500
To Net profit 24,000
1,56,375 1,56,375

The cost sheet shows
(a) The cost of materials as `13 per unit.
(b) The labour cost as `7.50 per unit.
(c) The factory overheads are absorbed at 60% of labour cost.
(d) The administration overheads (related to production) are absorbed at 20% of factory cost.
(e) Selling expenses are charged at `3 per unit.
(f) The opening stock of finished goods is valued at `22.50 per unit.

You are required to prepare
1. The cost sheet showing elements of cost (use FIFO method for stock valuation).
2. The statement showing the reconciliation of profit or loss as shown by the cost accounts with the profit as
shown by the financial accounts.
Ans. 1. Cost Sheet
Particulars Amount (`)

Direct materials @ `13 for 10,000 units 1,30,000
Direct wages @ `7.50 for 10,000 units 75,000
Prime Cost 2,05,000

Factory overheads at 60% of wages 45,000
Factory Cost 2,50,000
Administrative overheads at 20% of factory cost 50,000
Cost of Production 3,00,000
Add: Opening stock of finished goods (500 units × `22.50) 11,250
Less: Closing stock of finished goods (7,500)

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Particulars Amount (`)
Selling expenses at `3 per unit of 10,250 units 30,750
Profit (balancing figure) 24,250
Sales 3,58,750
2. Reconciliation Statement
Profit as per Cost Accounts 24,250
Add: Selling expenses over recovered (30,750 – 27,500) 3,250
Opening stock over valued (11,250 – 8,750) 2,500
Interest received 125
Dividend received 5,000 10,875
Less: Factory overheads under recovered (47,375 – 45,000) 2,375
Administration overheads under recovered (53,000 – 50,000) 3,000
Closing stock over valued (7,500 – 6,250) 1,250
Bad debts 2,000
Preliminary expenses 2,500 (11,125)
Profit as per Financial Accounts 24,000

Working note:
1. Calculation of units produced = Units sold + Closing finished units – Opening finished units
= 10,250 + 250 – 500
= 10,000 units
Cost of Production
2. Value of closing finished goods = ×Closing finished units
Units Produced
3, 00, 000
= ´250 = `7,500
10, 000
26. Given below is the trading and profit and loss account of a company for the year ended 31st March 2017.
To Direct Materials 27,40,000 By Sales (60,000 units) 60,00,000
To Direct Wages 15,10,000 By Closing Finished Goods 1,60,000
To Factory Expenses 8,30,000 (2,000 units)
To Administration Expenses 3,82,400 By Closing Work in Progress:
To Selling Expenses 4,50,00 Materials 64,000
To Preliminary Expenses 60,000 Wages 36,000
To Net profit 3,25,600 Factory Expenses 20,000 1,20,000
By Dividend Received 18,000
62,98,000 62,98,000

The company manufactures standard units. In the cost accounts:
1. Factory expenses have been allocated to production at 20% of prime cost.
2. Administrative expenses at `6 per unit produced.
3. Selling expenses at `8 per unit sold.

Prepare the costing profit and loss account of the company and reconcile the same with the profit disclosed by
the financial accounts.
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Ans. Costing Profit & Loss Account

To Direct Materials 27,40,000 By Sales (60,000 units) 60,00,000
To Direct Wages 15,10,000 By Closing Finished Goods (2,000 units) 1,72,645
To Factory Expenses 8,50,000 By Closing Work in Progress 1,20,000
To Administration Expenses 3,72,000
To Selling Expenses 4,80,000
To Net profit 3,40,645
62,92,645 62,92,645
Reconciliation Statement

Profit as per Cost Accounts 3,40,645
Add: Factory expenses over recovered (8,50,000 – 8,30,000) 20,000
Selling expenses over recovered (4,80,000 – 4,50,000) 30,000
Dividend received 18,000 68,000
Less: Administration overheads under recovered (3,82,400 – 3,72,000) 10,400
Closing stock over valued (1,72,645 – 1,60,000) 12,645
Preliminary expenses 60,000 (83,045)
Profit as per Financial Accounts 3,25,600

Working note:
(a) Factory expenses = 20% of prime cost = 20% (27,40,000 + 15,10,000) = `8,50,000
(b) Administration expenses = `6 × 62,000 units = `3,72,000
(c) Selling expenses = `8 × 60,000 units = `4,80,000
(d) Number of units produced = Units sold + Units in closing finished goods
= 60,000 + 2,000 = 62,000 units
Cost of Production
(e) Value of closing finished goods = ×Closing finished goods units
Units Produced
53,52, 000
= × 2, 000 = `1,72,654
60, 000
(f) Cost of production = 27,40,000 + 15,10,000 + 8,50,000 – 1,20,000 + 3,72,000 = `53,52,000
27. The following figures are available from the financial records of ABC Manufacturing Co. Ltd. for the year ended
31.03.2017.
Particulars Amount
Sales (20,000 units) 25,00,000
Materials 10,00,000
Wages 5,00,000
Factory overheads 4,50,000
Office and administrative overheads (production related) 2,60,000
Selling and distribution overheads 1,80,000
Finished goods (1,230 units) 1,50,000

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Particulars Amount
Work-in-process:
Materials 30,000
Labour 20,000
Factory overheads 20,000 70,000
Goodwill written off 2,00,000
Interest on capital 20,000

In the costing records, factory overhead is charged at 100% of wages, administration overhead 10% of factory cost
and selling and distribution overhead at the rate of `10 per unit sold.

Prepare a statement reconciling the profit as per cost records with the profit as per financial records.
Ans. Profit & Loss Account of ABC Manufacturing Co. Ltd.
For the year ended 31.03.2017

To Opening finished goods Nil By Sales (20,000 units) 25,00,000
To Materials 10,00,000 By Closing stock:
To Wages 5,00,000 Finished goods (1,230 units) 1,50,000
To Factory overheads 4,50,000 Work-in-process 70,000
To Office and Admin. overheads 2,60,000
To Selling and distribution overheads 1,80,000
To Goodwill written off 2,00,000
To Interest on capital 20,000
To Profit 1,10,000
27,20,000 27,20,000
Cost Sheet
Particulars Amount
Materials 10,00,000
Wages 5,00,000
Direct Expenses Nil
Prime Cost 15,00,000
Factory overheads at 100% of wages 5,00,000
Less: Closing stock of WIP (70,000)
Office and administrative overheads at 10% of factory cost 1,93,000
Cost of Production (21,230 units) 21,23,000
Less: Closing stock of finished goods {(21,23,000 ÷ 21,230) × 1,230 units} (1,23,000)
Production cost of 20,000 units or COGS 20,00,000
Selling and distribution overheads at `10 per unit 2,00,000
Profit (balancing figurte) 3,00,000
Sales 25,00,000

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Add: Factory overheads over recovered 50,000
Selling and distribution overheads over recovered 20,000
Closing stock under valued in costs 27,000 97,000
Less: Office and administrative overheads under recovered 67,000
Goodwill written off in financial accounts 2,00,000
Interest on capital 20,000 (2,87,000)
28. The following figures have been extracted from the Financial Accounts of a manufacturing firm for the first year of
its operation
Particulars Amount
Direct material consumption 50,00,000
Administration overheads (production related) 7,00,000
Selling and distribution overheads 9,60,000
Bad debts 80,000
Preliminary expenses written off 40,000
Legal charges 10,000
Dividends received 1,00,000
Interest received on deposits 20,000
Sales (1,20,000 units) 1,20,00,000
Closing stock:
Finished goods (4,000 units) 3,20,000
Work-in-process 2,40,000

The cost accounts for the same period reveal that the direct material consumption was `56,00,000. Factory overhead
is recovered at 20% on prime cost. Administration overhead is recovered at `6 per unit of production. Selling and
distribution overheads are recovered at `8 per unit sold.

Prepare the Profit and Loss Accounts as per financial records and Cost Sheet as per cost records.
Reconcile the profits as per the two records.

Ans. Profit & Loss Account
(As per financial records)
To Materials 50,00,000 By Sales (1,20,000 units) 1,20,00,000
To Wages 30,00,000 By Closing stock:
To Factory overheads 16,00,000 Finished goods (4,000 units) 3,20,000
To Gross profit c/d 29,60,000 Work-in-process 2,40,000
1,25,60,000 1,25,60,000

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To Office and Admin. overheads 7,00,000 By Gross profit b/d 29,60,000
To Selling and distribution Overheads 9,60,000 By Dividends 1,00,000
To Bad debts 80,000 By Interest 20,000
To Preliminary expenses written off 40,000
To Legal charges 10,000
To Profit 12,90,000
30,80,000 30,80,000
Statement of Cost and Profit

(As per Cost Records)
Particulars Amount
Direct materials 56,00,000
Factory overheads (20% of 86,00,000) 17,20,000
Less: Closing stock of WIP (2,40,000)
Factory Cost 1,00,80,000
Administrative overheads (1,24,000 units @ `6 per unit) 7,44,000
Cost of Production (1,24,000 units) 1,08,24,000
Less: Closing stock of Finished goods [(1,08,24,000 ÷ 1,24,000) × 4,000] (3,49,161)
Cost of goods sold (1,20,000 units) 1,04,74,839
Selling and distribution overheads (1,20,000 units @ `8 per unit) 9,60,000
Cost of sales 1,14,34,839
Net Profit (balancing figure) 5,65,161
Sales 1,20,00,000

Add: Excess of material consumption 6,00,000
Factory overheads over recovered 1,20,000
Administration overheads over recovered 44,000
Dividend received 1,00,000
Interest received 20,000 8,84,000
Less: Closing stock over valued in costs 29,161
Bad debts 80,000
Preliminary expenses written off 40,000
Legal charges 10,000 (1,59,161)

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29. Following are the figures extracted from the Cost Ledger of a manufacturing unit.
(`)
Stores:
Purchases 80,000
Transfer from WIP 40,000
Issue to WIP 80,000
Issue to repairs and maintenance 10,000
Sold as a special case at cost 5,000
Shortage in the year 3,000
Work-in-Process:
Opening inventory 30,000
Direct labour cost charged 30,000
Overhead cost charged 1,20,000
Closing Balance 20,000
Finished Products:
Entire output is sold at 70% profit on actual cost from work-in-process.
Others:
Wages for the period 35,000
Overhead Expenses 1,25,000

Ascertain the profit or loss as per financial account and cost accounts and reconcile them.
(`) (`)
To Balance b/d 15,000 By Work-in-process Control A/c 80,000
(Issued to WIP)
To Cost Ledger Control A/c 80,000 By Overhead Control A/c 10,000
(Purchases) (Issued for repairs)
To Work-in-process Control A/c 40,000 By Cost Ledger Control A/c 5,000
(Return from WIP) (Sold at cost)
By Overheads Control A/c* 3,000
(Shortages)
1,35,000 1,35,000

* Assumed normal
Wages Control A/c
(`) (`)
To Cost Ledger Control A/c 35,000 By Work-in -process Control A/c 30,000
35,000 35,000

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(`) (`)
To Stores Ledger Control A/c 10,000 By Work-in-process Control A/c 1,20,000
To Cost Ledger Control A/c 1,25,000
To Wages Control A/c 5,000 By Balance c/d 23,000
1,43,000 1,43,000
WIP Control A/c

(`) (`)
To Balance b/d 30,000 By Stores Ledger Control A/c 40,000
To Stores Ledger Control A/c 80,000 By Finished goods Control A/c 2,00,000
To Overheads Control A/c 1,20,000 By Balance c/d 20,000
2,60,000 2,60,000
* Finished output at cost 2,00,000

Profit at 10% on actual cost from WIP Sales 20,000
2,20,000
Statement of Profit as per Costing Records
(`)
Direct material Cost (˜80,000 – ˜40,000) 40,000
Direct wages 30,000
Prime Cost 70,000
Production Overheads 1,20,000
Works Cost 1,90,000
Add: Opening WIP 30,000
2,20,000
Less: Closing WIP (20,000)
Cost of finished goods 2,00,000
Profit (1 0% of cost) 20,000
Sales 2,20,000
Profit & Loss A/ c
(`) (`)
To Material (Op. bal. + Purchases – Sale) 90,000 By Sales A/c 2,20,000
To Opening WIP 30,000 By Closing WIP 20,000
To Wages for the period 35,000 By Closing stock of Raw Material 37,000
To Overheads expenses 1,25,000 By Net loss 3,000
2,80,000 2,80,000

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(`)
Profit (loss) as per Financial Accounts (3,000)
Add: Overheads over absorbed (refer Overhead control A/c) 23,000
Net Profit as per Cost Accounts 20,000
30. The following information is available from the financial books of a company having a normal production capacity
of 60,000 units for the year ended 31st March:
(i) Sales `10,00,000 (50,000 units).
(ii) There was no opening and closing stock of finished units.
(iii) Direct material and direct wages cost were `5,00,000 and `2,50,000 respectively.
(iv) Actual factory expenses were `1,50,000 of which 60% are fixed .
(v) Actual administrative expenses related with production activities were `45,000 which are completely fixed.
(vi) Actual selling and distribution expenses were `30,000 of which 40% are fixed .
(vii) Interest and dividends received `15,000.

You are required to:
(a) Find out profit as per financial books for the year ended 31st March;
(b) Prepare the cost sheet and ascertain the profit as per cost accounts for the year ended 31st March assuming that
the indirect expenses are absorbed on the basis of normal production capacity; and
(c) Prepare a statement reconciling profits shown by financial and cost books.
Ans.
(a) Profit & Loss Account
(for the year ended 31st March)
(`) (`)
To Direct Material 5,00,000 By Sales (50,000 units) 10,00,000
To Direct Wages 2,50,000 By Interest and dividends 15,000
To Factory expenses 1,50,000
To Administrative expenses 45,000
To Selling & Dist. 30,000
To Net Profit 40,000
10,15,000 10,15,000
(b) Cost Sheet
(for the year ended 31st March)
(`) (`)
Direct material 5,00,000
Prime cost 7,50,000
Factory expenses:
Variable (40% of `1,50,000) 60,000
Fixed (` 90,000 × 50,000/60,000) 75,000 1,35,000
Works cost 8,85,000
Administrative expenses: (`45,000 × 50,000/60,000) 37,500
Cost of production 9,22,500

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(`) (`)
Selling & distribution expenses:
Variable (60% off 30,000) 18,000
Fixed* (`12,000 × 50,000/60,000) 10,000 28,000
Profit (Balancing figure) 49,500
Sales revenue 10,00,000

*It is assumed that the company sells what it generally produces i.e. normal production.
(c) Statement of Reconciliation
(Reconciling profit shown by Financial and Cost Accounts)
(`) (`)
Profit as per Cost Account 49,500
Add : Income from interest and dividends 15,000
64,500
Less: Factory expenses under-charged in Cost Accounts (`1,50,000 – `1,35,000) 15,000
Administrative expenses under-charged in Cost Accounts (`45,000 – `37,500) 7,500
Selling & distribution expenses under-charged in Cost Accounts (`30,000 – `28,000) 2,000 (24,500)
Profit as per Financial Accounts 40,000
COST LEDGER
31. A company operates on historic job cost accounting system, which is not integrated with the financial accounts. At
the beginning of a month, the opening balances in cost ledger were:
(` in lakhs)
Stores Ledger Control Account 80
Work-in-Process Control Account 20
Finished Goods Control Account 430
Building Construction Account 10
Cost Ledger Control Account 540

During the month, the following transactions took place:
(Amounts in lakh)
Materials – Purchased 40
Issued to production 50
Issued to factory maintenance 6
Issued to building construction 4
Wages – Gross wages paid 150
Indirect wages 40
For building construction 10
Works Overheads – Actual amount incurred 160
(excluding items shown above)
Absorbed in building construction 20
Under absorbed 8
Royalty paid (related to production) 5
Selling, distribution and administration overheads 25
Sales 450

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At the end of the month, the stock of raw material and work-in-Process was `55 lakhs and `25 lakhs respectively.
The loss arising in the raw material accounts is treated as factory overheads. The building under construction was
completed during the month. Company's gross profit margin is 20% on sales.

Prepare the relevant control accounts to record the above transactions in the cost ledger of the company.
Ans. Cost Ledger Control A/c
(`) (`)
To Costing P & L A/c 450 By Balance b/d 540
To Building Construction A/c 44 By Stores Ledger Control A/c 40
To Balance c/d 483 By Wages Control A/c 150
By Works OH Control A/c 160
By Royalty A/c 5
By Admn. OH and S & D OH A/c 25
By Costing P&L A/c 57
977 977
Stores Ledger Control A/c
(`) (`)
To Balance b/d 80 By Work-in-process A/c 50
To Cost Ledger Control A/c 40 By Works OH Control A/c 6
By Building Const. A/c 4
By Works OH Control A/c 5
(Bal. fig .) (loss)
By Balance c/d 55
120 120
Wages Control A/c

(`) (`)
To Cost Ledger Control A/c 150 By Works OH Control A./c 40
By Building Const. A/c 10
By Work-in-proeess Control A/c 100
(Balancing figure)
150 150
Works Overhead Control A/c
(`) (`)
To Stores Ledger Control A/c 6 By Building Canst. A/c 20
To Wages Control A/c 40 By Work-in-proeess Control A/c 183
(Balancing figure)
To Cost Ledger Control A/c 160 By Costing P&L Ale (under- 8 absorption) 8
To Store Ledger Control A/c 5
(loss)
211 211

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Royalty A/c
(`) (`)
To Cost Ledger Control A/c 5 By Work-in-proeess Control A/c 5
5 5
Work-in-Proeess Control A/c
(`) (`)
To Balance b/d 20 By Finished Goods Control A/c 333
(Balancing figure)
To Stores Ledger Control A/c 50
To Wages Control A/c 100
To Works OH Control A/c 183
To Royalty A/c 5 By Balance c/d 25
358 358
(`) (`)
To Balance b/d 430 By Cost of Goods Sold A/c 360
(80% of `450)
To Work-in-process Control A/c 333 By Balance c/d 403
763 763
Cost of Goods Sold Ale
(`) (`)
To Finished Goods Control A/c 360 By Cost of sales A/c 360
360 360
Selling, Distribution and Administration Overhead A/c
(`) (`)
To Cost Ledger Control A/c 25 By Cost of sales A/c 25
25 25
Cost of Sales A/c
(`) (`)
To Cost of Goods Sold 360 By Costing P&L A/c 385
To Admn. OH and S&D OH A/c 25
385 385
Costing P & L A/c

(`) (`)
To Cost of Sales A/c 385 By Cost Ledger Control A/c (Sales) 450
To Works Overhead Control A/c 8
To Cost Ledger Control A/c 57
(Profit) (Balancing figure)
450 450

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Building Construction A/c
(`) (`)
To Balance b/d 10 By Cost Ledger Control A/c 44
To Stores Ledger Control A/c 4
To Wages Control A/c 10
To Works OH Control A/c 20
44 44
Trial Balance (` in Lakhs)

Dr. (`) Cr. (`)
Stores control A/c 55
Work-in -Process A/c 25
Finished goods A/c 403
Cost Ledger Adjustment A/c 483
483 483
32. The financial books of a company reveal the following data for the year ended 31st March, 2002

Opening stock:
Finished goods (875 units) 74,375

Work-in-process 32,000
During the year (01.04.01 to 31.03.02):
Raw materials consumed 7,80,000
Direct Labour 4,50,000
Goodwill written off 1,00,000
Administration overheads 2,95,000
Dividend paid 85,000
Bad Debts 12,000
Selling and Distribution Overheads 61,000
Interest received 45,000
Rent received 18,000
Sales (14,500 units) 20,80,000
Closing stock:
Finished goods (375 units) 41,250
Work-in-process 38,667

The cost records provide as under:
Factory overheads are absorbed at 60% of direct wages.
Administration overheads are recovered at 20% of factory cost.
Selling and distribution overheads are charged at `4 per unit sold.
Opening stock of finished goods is valued at `104 per unit.
The company values work-in-process at factory cost for both Financial and Cost Profit reporting.

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Required:
(i) Prepare statements for the year ended 31st March, 2002 to show
The profit as per financial records
The profit as per costing records.
(ii) Present a statement reconciling the profit as per costing records with the profit as per Financial Records?
[(15 Marks) May 2002]
Ans. (i) (a) Financial Profit and Loss A/c

To Opening stock: By Sales (14,500 units) 20,80,000
WIP 32,000 By Closing stock:
Finished goods (875 units) 74,375 WIP 38,667
To Raw material consumed 7,80,000 Finished goods (375 units) 41,250
To Direct labour 4,50,000
To Gross profit 8,23,542
21,59,917 21,59,917
To Factory overheads 3,00,000 By Gross profit 8,23,542
To Goodwill written off 1,00,000 By Interest received 45,000
To Administrative overheads 2,95,000 By Rent received 18,000
To Bad debts 12,000
To Selling and distribution overheads 61,000
To Dividend paid 85,000
8,86,542 8,86,542
(i) (b) Cost Sheet Showing Costing P/L (Production 14,000 units)
Particulars Amount
Direct material 7,80,000
Direct labour 4,50,000
Factory overhead (60% of direct wages) 2,70,000
Add: Opening WIP 32,000
Less: Closing WIP (38,667)
Administrative overhead (20% of factory cost) 2,98,667
Cost of Production 17,92,000
Add: Opening finished goods (`104 × 875 units) 91,000
Less: Closing Stock of finished goods (W.N. 2) (48,000)
Selling and distribution overheads (`4 × 14,500 units) 58,000
Profit (balancing figure) 1,87,000
Sales 20,80,000

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(ii) Reconciliation Statement

Profit as per Cost Records (Cost Sheet) 1,87,000
Add: Interest Received 45,000
Rent Received 18,000
Administration OH over recovered (2,98,667 – 2,95,000) 3,667
Opening stock overvalued (91,000 – 74,375) 16,625 83,292
Less: Goodwill written off 1,00,000
Dividend 85,000
Bad debts 12,000
Factory OH under recovered (3,00,000 – 2,70,000) 30,000
Selling and distribution OH under recovered (61,000 – 58,000) 3,000
Closing stock over valued (48,000 – 41,250) 6,750 (2,36,750)
Profit as per Financial Records 33,542

Working note:
1. Number of units produced = Units sold + Closing finished units – Opening finished units
= 14,500 + 375 – 875 = 14,000 units
Cost of Productions
2. Value of closing finished goods = × Closing finished goods units
Units Produced
17,92,000
= × 375 = `48,000
14,000
33. A manufacturing company disclosed a net loss of `3,47,000 as per their cost accounts for the year ended March 31,
2003. The financial accounts however disclosed a net loss of `5,10,000 for the same period.
The following information was revealed as a result of scrutiny of the figures of both the sets ofaccounts:
(a) Factory overheads under-absorbed 40,000
(b) Administration overheads over-absorbed 60,000
(c) Depreciation charged in financial accounts 3,25,000
(d) Depreciation charged in cost accounts 2,75,000
(e) Interest on investments not included in cost accounts 96,000
(f) Income-tax provided 54,000
(g) Interest on loan funds in financial accounts 2,45,000
(h) Transfer fees (credited in financial books) 24,000
(i) Stores adjustment (credited in financial books) 14,000
(j) Dividend received 32,000

Prepare a Memorandum Reconciliation Account. [(8 Marks) May 2003]

To Net Loss as per Cost books 3,47,000 By Admin. OH over recovered 60,000
To Factory OH under absorbed 40,000 By Interest on investment 96,000
To Depreciation under charged 50,000 By Transfer fees 24,000
To Income Tax 54,000 By Stores adjustment 14,000
To Interest on loan 2,45,000 By Dividend received 32,000
By Net loss as per Financial books 5,10,000
7,36,000 7,36,000

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34. A manufacturing company has disclosed a net loss of `2,13,000 as per their cost accounting records for the year
ended March 31, 2009. However, their financial accounting records disclosed a net loss of `2,58,000 for the same
period.

A security of data of both the sets of books of accounts revealed the following information
Details Amount
(a) Factory overheads under absorbed 5,000
(b) Administration overheads over absorbed 3,000
(c) Depreciation charged in financial accounts 70,000
(d) Depreciation charged in cost accounts 80,000
(e) Interest on investments not included in cost accounts 20,000
(f) Income tax provided in financial accounts 65,000
(g) Transfer fees (credit in financial accounts) 2,000
(h) Preliminary expenses written off 3,000
(i) Over valuation of closing stock of finished goods in cost accounts 7,000


To Net Loss as per Cost Books 2,13,000 By Admin. OH over recovered 3,000
To Factory OH under absorbed 5,000 By Depreciation over charged 10,000
To Income Tax 65,000 (80,000 – 70,000)
To Preliminary expenses w/o 3,000 By Interest on investment 20,000
To Over valuation of closing stock 7,000 By Transfer fees 2,000
By Net loss as per Financial Books 2,58,000
2,93,000 2,93,000
35. A manufacturing company has disclosed a net loss of `8,75,000 as per their cost accounting records for the year
ended March 31, 2010. However, their financial accounting records disclosed a net loss of `7,91,250 for the same
period.

A scrutiny of the data of both the sets of books of accounts revealed the following information:
Details Amount
(i) Factory overheads over-absorbed 47,500
(ii) Administration overheads under-absorbed 32,750
(iii) Depreciation charged in Financial Accounts 2,25,000
(iv) Depreciation charged in Cost Accounts 2,42,250
(v) Interest on investment not included in Cost Accounts 62,750
(vi) Income tax provided in Financial Accounts 7,250
(vii) Transfer fees (credit in Financial Accounts) 12,500
(viii) Preliminary expenses written off 27,500
(ix) Under-valuation of opening stock in Cost Accounts 6,250
(x) Under-valuation of closing stock in Cost Accounts 17,500

Prepare a Memorandum Reconciliation A/c. [(8 marks) Nov 2010]

W

To Net Loss as per Cost Books 8,75,000 By Factory OH over recovered 47,500
To Admin. OH under absorbed 32,750 By Depreciation over charged 17,250
To Income Tax 7,250 By Interest on investment 62,750
To Preliminary expenses w/o 27,500 By Transfer fees 12,500
To Under valuation of opening stock 6,250 By Under valuation of closing stock 17,500
By Net loss as per Financial Books 7,91,250
9,48,750 9,48,750
36. R Limited showed a net loss of `35,400 as per their cost accounts for the year ended 31st March, 2012. However, the
financial accounts disclosed a net profit of `67,800 for the same period.
The following information were revealed as a result of scrutiny of the figures of cost accounts and financial accounts
1.
Administrative overhead under recovered 25,500
2.
Factory overhead over recovered 1,35,000
3.
Depreciation under charged in Cost Accounts 26,000
4.
Dividend received 20,000
5.
Loss due to obsolescence charged in Financial Accounts 16,800
6.
7.
Bank interest credited in Financial Accounts 13,600
8.
Value of opening stock:
In Cost Accounts 1,65,000
In Financial Accounts 1,45,500
9. Value of closing Stock:
In Cost Accounts 1,25,000
In Financial Accounts 1,32,000
10. Goodwill written- off in Financial Accounts 25,000
11. Notional rent of own premises charged in Cost Accounts 60,000
12. Provision for doubtful debts in Financial Accounts 15,000

Prepare a reconciliation statement by taking costing net loss as base. [(8 Marks) Nov 2012]

Loss as per Cost Records (35,400)
Add: Factory overhead over recovered 1,35,000
Dividend received 20,000
Bank interest credited in financial A/c 13,600
Opening stock overvalued in cost A/c (1,65,000 – 1,45,500) 19,500
Closing stock undervalued in cost A/c (1,32,000 – 1,25,000) 7,000
Notional rent charged in cost A/c 60,000 2,55,100
Less: Administrative overheads under recovered 25,500
Depreciation under charged in cost A/c 26,000
Loss due to obsolescence in financial A/c 16,800
Goodwill w/o in financial A/c 25,000
Provisions for doubtful debt in financial A/c 15,000 (1,51,900)
Profit as per Financial Books 67,800

W
37. A manufacturing company has disclosed net loss of `48,700 as per their cost accounting records for the year ended
31st March, 2014. However their financial accounting records disclosed net profit of `35,400 for the same period.

A scrutiny of data of both the sets of books of accounts revealed the following informations:
(i) Factory overheads under absorbed `30,500
(ii) Administrative overheads over absorbed `65,000
(iii) Depreciation charged in financial accounts `2,25,000
(iv) Depreciation charged in cost accounts `2,70,000
(v) Income tax provision `52,400
(vi) Transfer fee (credited in financial accounts) `10,200
(vii) Obsolescence loss charged in financial accounts `20,700
(viii) Notional rent of own premises charged in cost accounts `54,000
(ix) Value of opening stock:
(a) In cost accounts `1,38,000
(b) In financial accounts `1,15,000
(x) Value of closing stock
(a) In cost accounts `1,22,000
(b) In financial accounts `1,12,500

Prepare a Memorandum Reconciliation Account by taking costing loss as base. [(5 Marks) May 2014]

To Net loss as per Costing Books 48,700 By Admin OH over absorbed 65,000
To Factory OH under absorbed 30,500 By Depreciation over charged 45,000
To Income tax provision 52,400 (2,70,000 – 2,25,000)
To Obsolescence loss 20,700 By Transfer fee 10,200
To Closing stock over valued 9,500 By Notional rent 54,000
To Net profit as per Financial Books 35,400 By Opening stock over valued 23,000
1,97,200 1,97,200
38. The Trading and Profit and Loss Account of a company for the year ended 31.03.2016 is as under:

To Materials 26,80,000 By Sales (50,000 units) 62,00,000
To Wages 17,80,000 By Closing stock (2,000 units) 1,50,000
To Factory expenses 9,50,000 By Dividend received 20,000
To Administrative expenses 4,80,200
To Selling expenses 2,50,000
To Preliminary expenses written off 50,000
To Net Profit 1,79,800
63,70,000 63,70,000
In the Cost Accounts:
(i) Factory expenses have been allocated to production at 20% of Prime Cost.
(ii) Administrative expenses absorbed at 10% of factory cost.
(iii) Selling expenses charged at `10 per unit sold.
Prepare the Costing Profit and Loss Account of the company and reconcile the Profit/Loss with the profit as shown
in the Financial Accounts. [(8 Marks) Nov 2016]
W
Ans. Costing Profit & Loss A/c

To Materials 26,80,000 By Sales (50,000 units) 62,00,000
To Wages 17,80,000 By Closing stock (2,000 units) 2,26,431
To Factory overheads 8,92,000
To Administration overheads 5,35,200
To S & D Expenses (50,000 × 10) 5,00,000
64,26,431 64,26,431

Working notes:
1. Factory overheads in costs = 20% of Prime cost
= 20% of (26,80,000 + 17,80,000) = 8,92,000
2. Administrative overheads = 10% of Factory cost
= 10% of (26,80,000 + 17,80,000 + 8,92,000) = 5,35,200
Cost of Productions
3. Valuation of closing stock = × Unit in Closing Stock
Units Produced
26,80,000 + 17,80,000 + 8,92,000 + 5,35,000
= × 2,000 = 2,26,431
52,000
4. Units produced = Units sold + Closing units – Opening units
= 50,000 + 2,000 – Nil = 52,000

Profit as per Cost Accounts 39,231
Add: Administrative expenses over recovered (5,35,200 – 4,80,200) 55,000
Selling expenses over recovered (5,00,000 – 2,50,000) 2,50,000
Dividend received 20,000 3,25,000
Less: Factory expenses under recovered (9,50,000 – 8,92,000) 58,000
Closing stock over valued in costs (2,26,431 – 1,50,000) 76431
Preliminary expenses written off 50,000 (1,84,431)
39. GK Limited showed a net loss of `2,43,300 as per their financial accounts for the year ended 31st March, 2018. However,
cost accounts disclosed a net loss of `2,48,300 for the same period. On scrutinizing both the set of books of accounts,
the following information were revealed
(a) Works overheads over recovered 30,400
(b) Selling overheads under recovered 20,300
(c) Administrative overhead under recovered 27,700
(d) Depreciation over charged in cost accounts 35,100
(e) Bad debts w/off in financial accounts 15,000
(f) Preliminary Exp. w/off in financial accounts 5,000
(g) Interest credited during the year in financial accountants 7,500

Prepare a reconciliation statement reconciling losses shown by financial and cost accounts by taking costing net loss
as base. [(5 marks) Nov 2018]

W

Loss as per Cost Records (2,48,300)
Add: Factory overhead over recovered 30,400
Depreciation over charged in cost accounts 35,100
Interest credited during the year in financial accounts 7,500 73,000
Less: Selling overheads under recovered 20,300
Administrative overheads under recovered 27,700
Bad debts w/off in financial accounts 15,000
Preliminary Exp. w/off in financial accounts 5,000 (68,000)
Profit as per Financial Books (2,43,300)
40. M/s Abid Private Limited disclosed a net profit of `48,408 as per cost books for the year ending 31st March 2019.
However, financial accounts disclosed net loss of `15,000 for the same period. On scrutinizing both the set of books
of accounts, the following information was revealed:
Works Overheads under recovered in Cost Books 48,600

Office Overheads over recovered in Cost Books 11,500
Dividend received on Shares 17,475
Interest on Fixed Deposits 21,650
Provision for doubtful debts 17,800
Obsolescence loss not charged in Cost Accounts 17,200
Stores adjustments (debited in Financial Accounts) 35,433
Depreciation charged in financial accounts 30,000
Depreciation recovered in Cost Books 35,000


To Works overhead under recovered 48,600 By Net profit as per Costing Books 48,408
To Provision for doubtful debts 17,800 By Admin overheads over recovered 11,500
To Obsolescence loss 17,200 By Dividend received 17,475
To Stores adjustments 35,433 By Interest on fixed deposits 21,650
By Depreciation over recovered
(35,000 – 30,000) 5,000
By Net loss as per Financial Books 15,000
1,19,033 1,19,033

W

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7 Cost Accounting System

NON INTEGRATED ACCOUNTING SYSTEM

Name of Account Dr. Cr.

Finished product (at cost) 2,10,835

Name of Account Dr. Cr.

Work-in-Progress Control A/c

Payable (Creditors) A/c

196 Cost and Management Accounting P

Finished Goods Control A/c

WIP Ledger Control A/c

Manufacturing Overheads Control A/c

Finished Goods Control A/c

P Cost Records Or Cost Accounting System 197

198 Cost and Management Accounting P

Production Overhead Control A/c

Administrative Overhead Control A/c

P Cost Records Or Cost Accounting System 199

200 Cost and Management Accounting P

Dr. (`) Cr. (`)

Name of Account Dr. Cr.

Direct wages 18,370

Particulars Amount Particulars Amount

Particulars Amount Particulars Amount

P Cost Records Or Cost Accounting System 201

Particulars Amount Particulars Amount

Particulars Amount Particulars Amount

Particulars Amount Particulars Amount

Particulars Amount Particulars Amount

Particulars Amount Particulars Amount

S. No. Entries Dr. Cr.

202 Cost and Management Accounting P

Wages incurred 70,000

Income from investment 10,000

Particulars Amount Particulars Amount

P Cost Records Or Cost Accounting System 203

Particulars Amount Particulars Amount

Works Overhead Control Account

Particulars Amount Particulars Amount

Costing Profit & Loss Account

Particulars Amount Particulars Amount

Particulars Amount Particulars Amount

204 Cost and Management Accounting P

Name of Account Dr. Cr.

Particulars Amount Particulars Amount

Particulars Amount Particulars Amount

P Cost Records Or Cost Accounting System 205

Particulars Amount Particulars Amount

Cost Ledger Control A/c

Particulars Amount Particulars Amount

Work in Progress Control Account

Particulars Amount Particulars Amount

Particulars Amount Particulars Amount

Cost of Sales Account

Particulars Amount Particulars Amount

206 Cost and Management Accounting P

Name of Account Dr. Cr.

Opening Balance 12,60,000

Opening Balance 25,20,000

Wages incurred 29,40,000