06 Cost Accounting System FT

Chapter 6 - Cost Accounting System
COST ACCOUNTING SYSTEM

Question 1 - Study Material
The following figures are extracted from the Trial Balance of Go-getter Co. on 30th September, 2020:
Dr. (Rs) Cr. (Rs)
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 6,300
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 as follows :
(i) Closing inventories :
Finished goods 1,15,000
Raw Materials 1,80,000
Work – in – progress 1,92,000
(ii) Outstanding Expenses on :
Direct employee cost 8,000
Indirect employee cost 1,200
Interest on borrowed funds 2,000
(iii) Depreciation to be provided on :
Office Appliances 5%
Plant & 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 Prepare a condensed Profit
and Loss statement of Go- getter Co. for the year ended 30th September, 2020 along with supporting schedules
of :
(i) Cost of Sales.
(ii) Selling & Distribution Expenses.
(iii) Administration Expenses.

As on 31st March, 2008 the following balances existed in a firm’s Cost Ledger:
CA Nitin Guru | www.edu91.org 6.1

Particulars 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
6,75,745 6,75,745
During the next three months the following items arose:
Particulars Amount (₹)
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 pass the journal Entries, write up the accounts and schedule the balances, stating what
each balance represents.
Solution 2:
Journal entries are as follows:
1. Finished stock ledger Control A/c Dr. 2,10,835
To Work-in-progress Control A/c 2,10,835
2. Manufacturing Overhead Control A/c Dr. 91,510
To Cost Ledger Control A/c 91,510
3. Stores Ledger Control A/c Dr. 1,23,000
To Cost Ledger Control A/c 1,23,000
4. (i) Wage Control A/c Dr. 72,195
To Cost Ledger Control A/c 72,195
(ii) Work-in-progress Control A/c Dr. 50,530
To Wage Control A/c 50,530
(iii) Manufacturing Overhead Control A/c Dr. 21,665
To Wage Control A/c 21,665
5. Cost of Sales A/c Dr. 1,85,890
To Finished Stock Ledger A/c 1,85,890
6. Work-in-Progress Control A/c Dr. 1,27,315
To Stores Ledger Control A/c 1,27,315
7. Finished Stock Ledger Control A/c Dr. 5,380
To Cost of Sales A/c 5,380
8. Cost Ledger Control A/c Dr. 2,900
To Stores Ledger Control A/c 2,900
9. Work-in-Progress Control A/c Dr. 77,200
To Manufacturing Overhead Control A/c 77,200
COST LEDGER
Cost Ledger Control Account
Particulars Amount (₹) Particulars Amount (₹)
To Stores Ledger Control A/c
(return) 2,900 By Balance b/d 6,65,220

By Manufacturing Overhead
To Balance c/d 9,49,025 Control A/c 91,510
By Stores Ledger Control A/c 1,23,000
By Wage Control A/c 72,195
9,51,925 9,51,925
Stores Ledger Control Account

By Work-in-Progress
To Balance b/d 3,01,435 Control A/c 1,27,315
To Cost Ledger Control A/c 1,23,000
By Cost Ledger Control
A/c 2,900
By Balance c/d 2,94,220
4,24,435 4,24,435
Work-in-Progress Control Account

By Finished Stock
To Balance b/d 1,22,365 Ledger Control A/c 2,10,835
To Wage Control A/c 50,530 By Balance c/d 1,66,575
To Manufacturing Overhead
Control A/c 77,200
3,77,410 3,77,410
Finished Stock Ledger Control Account

By Cost of Sales A/c
To Balance b/d 2,51,945 1,85,890
To Work-in-Progress Control A/c 2,10,835 By Balance c/d 2,82,270
To Cost of Sales A/c (return at
cost) 5,380
4,68,160 4,68,160
Manufacturing Overhead Control Account

To Cost Ledger Control A/c 91,510 By Balance b/d 10,525
By Work-in-Progress Control
To Wage Control A/c 21,665 A/c 77,200
By Balance c/d (under
recovered) 25,450
1,13,175 1,13,175
Wage Control Account

By Work-in-Progress Control
To Cost Ledger Control A/c 72,195 A/c 50,530
By Manufacturing Overhead
Control A/c 21,665
72,195 72,195
Cost of Sales Account


To Finished Stock Ledger By Finished Stock Ledger

Control A/c 1,85,890 Control A/c (Return) 5,380
By Balance c/d 1,80,510
1,85,890 1,85,890
Trial Balance
Work-in-Progress Control A/c 1,66,575
Finished Stock Ledger Control A/c 2,82,270
Manufacturing Overhead Control A/c 25,450
Cost of Sales A/c 1,80,510
9,49,025 9,49,025

JOURNALISE the following transactions assuming that cost and financial transactions are integrated:
Particulars ₹
Raw materials purchased 2,00,000
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
Manufacturing overhead charged to production 92,000
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
Question 4 - Nov 97, Nov 00

Pass Journal Entries under Non-Integrated System for the following transaction-
● Issue of Materials: Direct ₹ 5,50,000, Indirect ₹ 1,50,000.
● Materials worth ₹ 45,000 returned to Stores from Production Floor.
● Gross Wages paid ₹ 48,000, Employer’s Contribution to PF and ESI amount to ₹ 2,000. Wage Analysis
sheet shows ₹ 20,000 towards Direct Labour, ₹ 12,000 towards Indirect Factory Labour, ₹ 10,000
towards Salaries to Office Staff and ₹ 8,000 for Salaries to Sales Staff.
● Production Overhead incurred ₹ 1,40,000, Absorbed ₹ 2,65,000.
● During physical verification of Stores, it was found that 100 units of Raw Materials returned to the
Supplier has not been recorded. Its Purchase Invoice Price is ₹ 50 per unit, while the current Standard
Cost is ₹ 48 per unit. [The Company policy is to written off/adjust the differences in Costing P & L A/c.]
Solution 4:
Particulars Dr. Cr.
1 Work-in-Progress Control A/c Dr. 5,50,000
Production OH Control A/c Dr. 1,50,000
To Raw Materials Control A/c 7,00,000
(Being Raw Materials issued for Direct and Indirect purposes.)
2 Raw Materials Control A/c Dr. 45,000
To Work-in-Progress Control A/c 45,000
(Being Materials returned to Stores from Production Floor.)
3 Wages Control A/c Dr. 50,000
To General Ledger Adjustment A/c 50,000

(Being Wages paid ₹ 48,000 + Employers' Contribution to PF and ESI ₹

2,000 = Total Labour Cost ₹ 50,000)
4 Work-in-Progress Control A/c Dr. 20,000
Production OH Control A/c Dr. 12,000
Administrative OH Control A/c Dr. 10,000
Selling & Distribution OH Control A/c Dr. 8,000
To Wages Control A/c 50,000
(Being Wages analyzed as ₹ 20,000 towards Direct Labour, ₹ 12,000
towards Indirect Factory Labour, ₹ 10,000 towards
Salaries to Office Staff and ₹ 8,000 for Salaries to Sales Staff.)
5 Production OH Control A/c Dr. 1,40,000
To General Ledger Adjustment A/c 1,40,000
(Being Production OH incurred)
6 Work-in-Progress Control A/c Dr. 2,65,000
To Production OH Control A/c 2,65,000
(Being Production OH absorbed)
7 Costing P & L A/c Dr. 37,000
To Production OH Control A/c 37,000
(Being under absorption transferred to Costing P & L Account)
8 General Ledger Adjustment A/c (₹ 50 × 100 units) Dr. 5,000
To Ram Material Control A/c [at Standard Cost] (₹ 48 × 100 units) 4,800
To Costing P & L A/c (Variance written off/written back) 200
(Being Materials returned to Supplier, price difference adjusted in Costing
P & L)
Notes:
● It is assumed that sufficient stock of RM is available for issue.
● Difference in absorption is ignored. Alternatively, difference in absorption can be transferred to Costing
P & L A/c, after preparing the POH Control A/c as indicated below.
Production Overheads Control Account

To Raw Material Control – Indirect
Materials 1,50,000 By WIP Control – POH absorption 2,65,000
By Costing P & L A/c –transfer
To Wages Control –Indirect wages 12,000 (Balancing Figure) 37,000
To General Ledger Adjustment – POH
incurred 1,40,000
3,02,000 3,02,000
Non Integrated System – Various Ledger Accounts

Acme Manufacturing Co. Ltd. opens the costing records, with the balances as on 1st July, 20X8 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
3,25,150 3,25,150
The following are the transactions for the quarter ended 30th September 20X8:
Particulars (₹)

Materials purchased 4,80,100

Materials issued to jobs 4,77,400
Materials to works maintenance 41,200
Materials to administration office 3,400
Materials to selling department 7,200
Wages direct 1,49,300
Wages indirect 65,000
Transportation for indirect materials 8,400
Production overheads 2,42,250
Absorbed production overheads 3,59,100
Administration overheads 74,000
Administration allocation to production 52,900
Administration allocation to sales 14,800
Sales overheads 64,200
Sales 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, 20X8.
Question 6 - Nov 98, Nov 18

The following balances were extracted from a company’s ledger as on 31st December, 1997:
Particulars Amount (₹) Amount (₹)
Raw materials control A/c 48,836
Work-in-progress control A/c 14,745
Finished stock control A/c 21,980
Nominal ledger control A/c 85,561
85,561 85,561
Further transactions took place during the following quarter as follows:

Particulars Amount (₹)
Factory overhead – allocated to WIP 11,786
Goods finished – at cost 36,834
Raw materials purchased 22,422
Direct wages – allocated to WIP 18,370
Cost of goods sold 42,000
Raw materials – issued to production 17,000
Raw materials – credited by suppliers 1,000
Inventory audit – raw materials losses 1,300
WIP rejected (with no scrap value) 1,800
Customer's returns (at cost) of finished goods 3,000

Prepare all Leger Accounts in Cost Leger.
Solution 6:
Raw Materials Control Account
To Balance b/d 48,836 By W.I.P. control A/c 17,000
To Nominal ledger control A/c 22,422 By Nominal ledger control A/c 1,000
By Nominal ledger control A/c 1,300
By Balance c/d 51,958
71,258 71,258


To Balance b/d 14,745 By Finishing stock control A/c 36,834
To Nominal ledger control A/c 11,786 By Nominal ledger control A/c 1,800
To Raw material control A/c 17,000 By Balance c/d 23,267
To Nominal ledger control A/c 18,370
61,901 61,901
Finished Stock Control Account

To Balance b/d 21,980 By Nominal ledger control A/c 42,000
To W.I.P. Control A/c 36,834 By Balance c/d 19,814
To Nominal ledger control A/c 3,000
61,814 61,814
Nominal Ledger Control Account

To Raw material control A/c 1,000 By Balance b/d 85,561
To Raw material control A/c 1,300 By Raw material control A/c 22,422
To Finished stock control A/c 42,000 By W.I.P. control A/c 11,786
To W.I.P. Control A/c 1,800 By W.I.P. control A/c 18,370
To Balance c/d 95,039 By Finishing stock control A/c 3,000
1,41,139 141139
Completion of Accounts – Incomplete Records

Question 7 - May 97, Study Material
A fire destroyed some accounting records of Unfortunate Ltd. You have been able to collect the following from
the spoilt papers/ records and as a result of consultation with accounting staff in respect of January.
Incomplete Ledger Entries:
Raw-Materials Account
To balance b/d 32,000
Work-in-Progress Account
To balance b/d 9,200 By Finished Goods Control A/c 1,51,000
Payables (Creditors) Account

By Balance b/d 16,400
To Balance c/d 19,200
Manufacturing Overheads Account

To Cost Ledger Control A/c
(Amount Spent) 29,600
Finished Goods Account

To balance b/d 24,000
By balance c/d 30,000
Additional Information:
● The Cashbook showed that ₹ 89,200 have been paid to Creditors for Raw Material.

● Ending inventory of Work-in-Progress included Material ₹ 5,000 on which 300 Direct Labour Hours have
been booked against Wages and Overheads.
● The Job Card showed that workers have worked for 7,000 hours. The Wage Rate is ₹ 10 per Labour
Hour.
● Overhead Recovery Rate was ₹ 4 per Direct Labour Hour.
You are required to complete the above accounts in the Cost Ledger of the Company.
Solution 7:
(Materials) Stores Ledger Control Account
By WIP Control A/c (RM issued to
To balance b/d 32,000 Production) 53,000
To Cost Ledger Control (RM Taken from WIP Control
Purchases) 92,000 A/c
Taken from Memorandum
Creditors A/c By balance c/d (balancing figure) 71,000
1,24,000 1,24,000
Memorandum Creditors Account (to calculate Purchases)

To Cash/ Bank (amount paid to
Creditors) 89,200 By balance b/d 16,400
By Stores Ledger Control (RM
To balance c/d 19,200 Purchases) (Bal. Figure) 92,000
1,08,400 1,08,400
Manufacturing OH Control Account

To Cost Ledger Control A/c (OH
incurred) 29,600 By WIP Control A/c (OH absorbed)
= 7,000 hours at ₹ 4 per hour 28,000
By balance c/d (balancing figure) 1,600
29,600 29,600

By Finished Goods Control A/c
To balance b/d 9,200 (Production 1,51,000
To Stores Ledger Control (RM Issues)
(b/f) 53,000 By balance c/d 9,200
To Wages Control A/c (7,000 hours at
₹ 10) 70,000
To POH Control (Absorbed) (7,000
hours at ₹ 4) 28,000
1,60,200 1,60,200
Value of Closing WIP = Materials ₹ 5,000 + Labour 300 hours at ₹ 10 + OH 300 hours at ₹ 4 = ₹ 9,200.
Finished Goods Control Account

By Cost of Sales A/c (COGS
To balance b/d 24,000 Transfer) 1,45,000
To WIP Control A/c (FG
Production) 1,51,000 By balance c/d 30,000
1,75,000 1,75,000


The following incomplete accounts are furnished to you for the month ended 31st October, 20X8.
1.10.20X8 To Balance ₹ 54,000
Work in Process Control Account
1.10.20X8 To Balance ₹ 6,000
1.10.20X8 To Balance ₹ 75,000
Factory Overheads Control Account
Total debits for October, 20X8 ₹ 45,000
Factory Overheads Applied Account
Cost of Goods Sold Account
Creditors for Purchases Account

1.10. 20X8 By Balance ₹ 30,000
Additional information:
(i) The factory overheads are applied by using a budgeted rate based on direct labour hours. The budget for
overheads for 20X8 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 31.10.20X8 is ₹ 15,000 and the payments made
to creditors in October, 20X8 amount to ₹ 1,05,000.
(iii) The finished goods inventory as on 31st October, 20X8 is ₹ 66,000.
(iv) The cost of goods sold during the month was ₹ 1,95,000.
(v) On 31st October, 20X8 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, 20X8. All factory workers earn same rate.
(vii) All actual factory overheads incurred in October, 20X8 have been posted.
You are required to FIND:
a) Materials purchased during October, 20X8.
b) Cost of goods completed in October, 20X8.
c) Overheads applied to production in October, 20X8.
d) Balance of Work-in-process Control A/c on 31st October, 20X8.
e) Direct materials consumed during October, 20X8.
f) Balance of Stores Ledger Control Account on 31st October, 20X8.
g) Over absorbed or under absorbed overheads for October, 20X8.

Question 9 - Nov 2014, May 17
You are given the following information of the Cost Department of a Manufacturing Company:
Stores: Work-in-Progress:
Opening Balance 12,60,000 Opening Balance 25,20,000
Purchases 67,20,000 Direct Wages applied 25,20,000
Transfer from Work-in-Progress 33,60,000 Overhead applied 90,08,000
Issue to Work-in-Progress 67,20,000 Closing Balance 15,20,000
Issue to Repairs and
Maintenance 840,000
Shortage found in stock taking 2,52,000
Finished Products: Entire output is sold at a profit of 12% on actual cost from work-in-progress.
Others information: Wages incurred ₹ 29,40,000, Overhead Incurred ₹ 95,50,000.
Income from Investments – ₹ 4,00,000, Loss on sale of Fixed Assets ₹ 8,40,000.
Shortage in stock taking is treated as normal loss.
You are required to prepare –
(a) Stores Control Account, (b) Work-in-Progress Control Account, (c) Costing P & L Account, (d) Profit & Loss
Account, and (e) Reconciliation Statement.

Question 10 - Rtp May 2022

X Ltd. maintains a non-integrated accounting system for the purpose of management information. The
following are the data related with year 2021 -22:
Particulars Amount (‘000)
Opening balances:
- Stores ledger control A/c 48,000
- Work-in-process control A/c 12,000
- Finished goods control A/c 2,58,000
- Building construction A/c 6,000
- Cost ledger control A/c 3,24,000
During the year following transactions took place:
Materials:
- Purchased 24,000
- Issued to production 30,000
- Issued to general maintenance 3,600
- Issued to building construction 2,400
Wages:
- Gross wages paid 90,000
- Indirect wages paid 24,000
- For building construction 6,000
Factory overheads:
- Actual amount incurred (excluding items shown above) 96,000
- Absorbed in building construction 12,000
- Under-absorbed 4,800
Royalty paid 3,000
Selling distribution and administration overheads 15,000
Sales 2,70,000
At the end of the year, the stock of raw material and work-in-process was Rs 3,30,00,000 and Rs 15,00,000
respectively. The loss arising in the raw material account is treated as factory overheads. The building under
construction was completed during the year. Gross profit margin is 20% on sales.
Required:
PREPARE the relevant control accounts to record the above transactions in the cost ledger of the company.
Integrated Accounting System

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 30th June, 2020. (Narrations are not required.)
(Rs)
Raw materials purchased (50% on Credit) 6,00,000
Materials issued to production 4,00,000
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
Question12 - May 2022

Journalize the following transactions assuming the cost and financial accounts are integrated:
Particulars Amount (Rs.)
Direct Materials issued to production Rs. 5,88,000
Allocation of Wages (Indirect) Rs. 7,50,000

Factory Overheads (Over absorbed) Rs. 2,25,000

Administrative Overheads (Under absorbed) Rs. 1,55,000
Deficiency found in stock of Raw material (Normal) Rs. 2,00,000
Question 13 - Rtp
From the following information write up Control Accounts and prepare a Trial Balance:
Opening Balances
Share Capital 5,00,000 Sundry Creditors 3,00,000 Bank 50,000
Reserves 3,00,000 Sundry Debtors 3,00,000 Cash 50,000
Plant and Machinery 5,00,000 Stock 2,00,000
Transactions during the year were as follows

Manufacturing OH charged to
Purchases of Stores 12,00,000 production 3,75,000
Stores issued to Production 12,00,000 Selling and Distribution Expenses 2,00,000
Stores in Hand 1,00,000 Finished Stock Production at Cost 20,00,000
Wage (Direct) incurred 7,00,000 Sales 30,00,000
Direct Wages charged to
production 6,50,000 Inventory Adjustment 1,00,000
Manufacturing OH incurred 4,00,000 Payment to Creditors 10,00,000
Received from Debtors 20,00,000
Cost and Financial Records are integrated and books are kept accordingly.
Solution 13:
By WIP Control – issued to
To balance b/d 2,00,000 production 12,00,000
To Cash/ Bank / Creditors (RM
Purchases) 12,00,000 By Inventory Adjustment A/c 1,00,000
By balance c/d (balancing figure) 1,00,000
14,00,000 14,00,000
Wages Control Account
To Cash / Bank 7,00,000 By WIP Control – Direct Wages 6,50,000
By POH Control – Indirect Wages
(balancing figure) 50,000
7,00,000 7,00,000
POH Control Account
To Cash/Bank/ – POH paid 4,00,000 By WIP Control – POH absorbed 3,75,000
To Wages Control (Indirect Wages
transfer) 50,000 By balance c/d (balancing figure) 75,000
4,50,000 4,50,000
WIP Control Account

To Stores Ledger Control – RM By Finished Goods Control –
Consumed 12,00,000 Production transfer 20,00,000
To Wages Control – Direct Wages 6,50,000 By balance c/d (balancing figure) 2,25,000
To POH Control – POH absorbed 3,75,000
22,25,000 22,25,000


To WIP Control – Production
transfer 20,00,000 By Cost of Sales A/c – COGS transfer 20,00,000
20,00,000 20,00,000
SOH Control Account

By Cost of Sales A/c – SOH
To Cash/ Bank / – SOH paid 2,00,000 absorbed 2,00,000
2,00,000 2,00,000

To Finished Goods Control A/c 20,00,000 By P & L A/c – COS transfer 22,00,000
To SOH Control A/c 2,00,000
22,00,000 22,00,000
Sales Account
To P & L A/c – Sales transfer 30,00,000 By Debtors A/c – Sales made 30,00,000
30,00,000 30,00,000
Inventory Adjustment Account

To Stores Ledger Control A/c 1,00,000 By P & L A/c – transfer 1,00,000
1,00,000 1,00,000
Profit and Loss Account

To Cost of Sales 22,00,000 By Sales 30,00,000
To Normal Profit c/d (balancing
figure) 8,00,000
Total 30,00,000 Total 30,00,000
To Inventory Adjustment written off 1,00,000 By Normal Profit b/d 8,00,000
To Net Profit for the year c/d
(balancing figure) 7,00,000
8,00,000 8,00,000
Sundry Debtors Account

By Cash/Bank (Received from
To balance b/d 3,00,000 Debtors) 20,00,000
To Sales A/c 30,00,000 By balance c/d (balancing figure) 13,00,000
33,00,000 33,00,000
Sundry Creditors Account

To Bank (Payments) 10,00,000 By balance b/d 3,00,000
To balance c/d (balancing figure) 5,00,000 By Stores Ledger Control A/c 12,00,000
15,00,000 15,00,000

Share Capital Account

To balance c/d (balancing figure) 5,00,000 By balance b/d 5,00,000
5,00,000 5,00,000
Reserves Account
To balance c/d (balancing figure) 3,00,000 By balance b/d 3,00,000
3,00,000 3,00,000
Plant and Machinery Account

To balance b/d 5,00,000 By balance c/d (balancing figure) 5,00,000
5,00,000 5,00,000
Cash and Bank Account

To balance b/d Cash 50,000 By Sundry Creditors 10,00,000
Bank 50,000 By Wages Control A/c 7,00,000
To Sundry Debtors 20,00,000 By POH Control A/c 4,00,000
To balance c/d (Bank Overdraft) 2,00,000 By SOH Control A/c 2,00,000
23,00,000 23,00,000
Trial Balance at the end of the period

Work in Progress Control A/c 2,25,000
Production OH Control A/c 75,000
Bank Overdraft A/c 2,00,000
Debtors A/c 13,00,000
Creditors A/c 5,00,000
Plant and Machinery A/c 5,00,000
Share Capital A/c 5,00,000
Reserves A/c 3,00,000
Profit and Loss A/c 7,00,000
Total 22,00,000 22,00,000

Bangalore Petrochemicals Co. keeps books on integrated accounting system. The following balances appear
in the books as on 1st January, 2005.
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
1,25,000 1,25,000

Transactions for the year ended 31st Dec., 2005 were as given below:
Particulars Amount (₹) Amount (₹)
Wages – direct 87,000
Wages – indirect 5,000 92,000
Purchase of materials (on credit) 1,00,000
Materials issued to production 1,10,000
Materials for repairs 2,000
Goods finished during the year (at cost) 2,15,000
Sales (credit) 3,00,000
Cost of goods sold 2,20,000
Production overhead absorbed 48,000
Production overhead incurred 40,000
Administration overhead incurred (production) 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
Prepare accounts in the integrated ledger.
Solution 14:
Stores Control Account
To Balance b/d 18,000 By Work-in-Progress A/c 1,10,000
To Creditors A/c 1,00,000 By Production Overheads 2,000
1,18,000 1,18,000
Wages Control Account

To Bank A/c 92,000 By Work-in-Progress A/c 87,000
By Production overheads
A/c 5,000
92,000 92,000
Work-in-Progress Account
To Balance b/d 17,000 By Finished goods A/c 2,15,000
To Stores control A/c 1,10,000 By Balance c/d 47,000
To Wages control A/c 87,000
To Production overheads A/c 48,000
2,62,000 2,62,000
Production Overhead Account

To Wages Control A/c 5,000 By Work-in-Progress A/c 48,000
To Stores Control A/c 2,000 By Prepaid Rent A/c 300
To Bank A/c 40,000
To Depreciation Provision 1,300
48,300 48,300

Finished Goods Account

To Balance b/d 13,000 By Cost of Sales A/c 2,20,000
To Work-in-Progress 2,15,000 By Balance c/d 20,000
To Administration Overhead 12,000
2,40,000 2,40,000
Administration Overheads Account

To Bank A/c 12,000 By Finished Goods A/c 12,000
12,000 12,000

To Finished Goods A/c 2,20,000 By Sales A/c 2,34,000
To Selling and Distribution
Overheads A/c 14,000
2,34,000 2,34,000
Selling and Distribution Overheads Account

To Bank A/c 14,000 By Cost of Sales A/c 14,000
14,000 14,000
Sales Account
To Cost of Sales 2,34,000 By Debtors A/c (Cr. Sales) 3,00,000
To P & L A/c (Profit) 66,000
3,00,000 3,00,000
Prepaid Rent Account

To Production Overheads 300 By Balance c/d 300
300 300
Depreciation Provision Account

To Balance c/d 6,300 By Balance b/d 5,000
By Production Overhead A/c 1,300
6,300 6,300
Profit and Loss Account

To Balance c/d 98,000 By Sales A/c 66,000
By Profit b/d (last year) 32,000
98,000 98,000
Debtors Account
To Balance b/d 12,000 By Bank A/c 2,90,000
To Sales 3,00,000 By Balance c/d 22,000

3,12,000 3,12,000
Creditors Account
To Bank 1,01,000 By Balance b/d 8,000
To Balance c/d 7,000 By Stores Control A/c 1,00,000
1,08,000 1,08,000
Bank Account
To Balance b/d 10,000 By Creditors 1,01,000
To Debtors 2,90,000 By Wages Control A/c 92,000
By Production Overhead
A/c 40,000
By Administration
Overhead A/c 12,000
By Selling & Distribution
Overhead A/c 14,000
3,00,000 3,00,000
Fixed Assets Account

To Balance b/d 55,000 By Balance c/d 55,000
55,000 55,000
Share Capital Account

To Balance c/d 80,000 By Balance b/d 80,000
80,000 80,000
Trial Balance As on 31st December, 2005

Stores Control A/c 6,000
Work-in-Progress A/c 47,000
Finished Goods A/c 20,000
Bank A/c 41000
Creditors A/c 7,000
Fixed Assets A/c 55,000
Debtors A/c 22,000
Share Capital A/c 80,000
Depreciation Provision A/c 6,300
Profit and Loss A/c 98,000
Prepaid Rent A/c 300
Total 1,91,300 1,91,300
Journal Entries
Question 15 - Rtp
Journalize the following transactions in the books of a Company maintaining Integrated Accounts –
Credit Purchases ₹ 12,00,000
Production Wages paid ₹ 7,00,000
Stocks issued to Production Orders ₹ 8,00,000
Works OH charged to production ₹ 4,50,000

FG transferred from Production Orders ₹ 18,00,000

AOH charged to Production ₹ 1,50,000
Works OH outstanding ₹ 1,20,000
Works Expenses Paid ₹ 4,60,000
Solution 15:
Journal Entries under Integrated System of Accounting
1. Stores Ledger Control A/c Dr. 12,00,000
To Sundry Creditors A/c 12,00,000
(Being goods purchased on credit)
2. Wages Control A/c Dr. 7,00,000
To Cash / Bank A/c 7,00,000
(Being Production Wages paid)
To Wages Control A/c 7,00,000
(Being Production Wages transferred to WIP Control A/c)
(Being Stores issued against Production Orders)
To Production Overheads Control A/c 4,50,000
(Being Production OH allocated to production/ jobs)
6. Finished Goods Control A/c Dr. 18,00,000
To Work-in-Progress Control A/c 18,00,000
(Being goods finished during the year transferred)
7. Finished Goods Control A/c Dr. 1,50,000
To Administration Overhead Control A/c 1,50,000
(Being Administration Expenses charged to production)
8. Production OH Control A/c Dr. 1,20,000
To Works Expenses Payable A/c 1,20,000
(Being Works Expenses incurred during the period but still unpaid)
9. Production OH Control A/c Dr. 4,60,000
To Cash/ Bank A/c 4,60,000
(Being Works Expenses paid during the period)
Question 16 - Nov 13
Journalize the following transactions assuming cost and financial accounts are integrated:
Particulars ₹
Material issued:
Direct 3,25,000
Indirect 1,15,000
Allocation of wages (25% indirect) 6,50,000
Under / Over absorbed overheads
Factory (over) 2,50,000
Administration (under) 1,75,000
Payment to sundry creditors 1,50,000
Collection from sundry debtors 2,00,000
Discrepancies between Book Stock and Physical Stock

Question 17 - May 91
After the annual stock taking you come to know of some significant discrepancies between book stock and
physical stock. You gather the following information:
Item Stock Card (Units) Stores Ledger (Units) Physical Check (Units) Cost/Unit (₹)

A 600 600 560 60

B 380 380 385 40
C 750 780 720 10
(a) What action should be taken to record the information shown above?
(b) Suggest reasons for the shortage and discrepancies disclosed above and recommend a possible course of
action by management to prevent future losses.
Solution 17:
(a) For recording the information shown in the problem under consideration, the following action May be
taken:
1. Check the stock card and stores ledger. The correct physical quantity should be recorded.
2. Investigate reasons for stock losses or surpluses.
3. After ascertaining the reasons for stock losses the following treatment May be followed:
● Debit Factory Overhead A/c
Credit Stores Ledger Control A/c
● (If the shortage is considered as normal loss)
Debit Costing P & L A/c
● Credit Stores Ledger Control A/c
(If the shortage is considered as abnormal)
● Debit Work-in-Progress A/c
Credit Stores Ledger Control A/c
(If the shortage is due to non-recording or short recording, etc.)
4. Rectification entry May be passed for clerical errors.
5. After ascertaining the reason for stock surpluses on appropriate action May be taken as follows:
● Debit Stores Ledger A/c
Credit Factory Overhead A/c
(If the Excess of stock is due to normal causes)
● Debit Stores Ledger Control A/c
Credit Costing P & L A/c
(If the excess at stock is due to abnormal causes)
● Debit Stores Ledger Control A/c
Credit Work-in-Progress A/c
(If the excess of stock is due to wrong recording, etc.)
6. In the given example the losses are with reference to items A (₹ 60 × 40 units = ₹ 2,400) and C (₹ 10 × 60 = ₹
600). As the reasons for these losses are not given, they May be debited to P & L A/c and Stores Ledger
Control A/c be credited accordingly.
7. The gains are in respect of stock item B (₹ 40 × 5 = ₹ 200). For treating gain of ₹ 200, Stores Ledger Control
A/c be debited and Costing P & L A/c be credited.
(b) Reasons for the shortage and discrepancies:

(i) Wastage of material due to spoilage, evaporation etc. which May be normal or abnormal.
(ii) Components issued for production without entry on stock card and/or stores ledger.
(iii) Stores staff wrongly reading figures on the requisitions.
(iv) Theft of stock from stores.
(v) Clerical errors in stores ledger.
Recommended Course of action to prevent future losses

(i) Entry in the stores should be restricted to authorized persons only.
(ii) All issues of stock should be against proper stock requisition slips.
(iii) Stores should follow a system of internal check for all items of stock.
(iv) Proper accounting is done for all stock movements.
(v) Recording of entries in stores ledger and stock card should be made carefully.
(vi) Stock items which come first in the stores should be issued first to avoid losses due to deterioration or
obsolescence.

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Chapter 6 - Cost Accounting System

COST ACCOUNTING SYSTEM

Question 2 - Study Material

CA Nitin Guru | www.edu91.org 6.1

Particulars Dr. (₹) Cr. (₹)

CA Nitin Guru | www.edu91.org 6.2

Stores Ledger Control Account

Work-in-Progress Control Account

Finished Stock Ledger Control Account

Manufacturing Overhead Control Account

Wage Control Account

Cost of Sales Account

CA Nitin Guru | www.edu91.org 6.3

To Finished Stock Ledger By Finished Stock Ledger

Question 3 - Study Material

Question 4 - Nov 97, Nov 00

CA Nitin Guru | www.edu91.org 6.4

(Being Wages paid ₹ 48,000 + Employers' Contribution to PF and ESI ₹

Production Overheads Control Account

Non Integrated System – Various Ledger Accounts

CA Nitin Guru | www.edu91.org 6.5

Materials purchased 4,80,100

Question 6 - Nov 98, Nov 18

Further transactions took place during the following quarter as follows:

Customer's returns (at cost) of finished goods 3,000

Work-in-Progress Control Account

CA Nitin Guru | www.edu91.org 6.6

Particulars Amount (₹) Particulars Amount (₹)

Finished Stock Control Account

Nominal Ledger Control Account

Completion of Accounts – Incomplete Records

Payables (Creditors) Account

Manufacturing Overheads Account

Finished Goods Account

CA Nitin Guru | www.edu91.org 6.7

Memorandum Creditors Account (to calculate Purchases)

Manufacturing OH Control Account

Work-in-Progress Control Account

Finished Goods Control Account

CA Nitin Guru | www.edu91.org 6.8

Question 8 - Study Material

Cost of Goods Sold Account

Creditors for Purchases Account

CA Nitin Guru | www.edu91.org 6.9

Question 10 - Rtp May 2022

Integrated Accounting System

Question12 - May 2022

CA Nitin Guru | www.edu91.org 6.10

Factory Overheads (Over absorbed) Rs. 2,25,000

Transactions during the year were as follows

WIP Control Account

CA Nitin Guru | www.edu91.org 6.11

Finished Goods Control Account

SOH Control Account

Cost of Sales Account

Inventory Adjustment Account

Profit and Loss Account

Sundry Debtors Account

Sundry Creditors Account

CA Nitin Guru | www.edu91.org 6.12