CHAPTER 1COST ACCOUNTING SYSTEMINTRODUCTIONCost accounting is a process of collecting, analyzing, summarizing and evaluating various alternative courses of action. Its goal is to advise the management on the most appropriate course of action based on the cost efficiency and capability. Cost accounting provides the detailed cost information that management needs to control current operations and plan for the future.Since managers are making decisions only for their own organization, there is no need for the information to be comparable to similar information from other organizations. Instead, information must be relevant for a particular environment. Cost accounting information is commonly used in financial accounting information, but its primary function is for use by managers to facilitate making decisions.Unlike the accounting systems that help in the preparation of financial reports periodically, the cost accounting systems and reports are not subject to rules and standards like the Generally Accepted Accounting Principles. As a result, there is wide variety in the cost accounting systems of the different companies and sometimes even in different parts of the same company or organization. A cost accounting system is a system designed for managers to help them make decisions and includes; input measurement basis, inventory valuation method, cost accumulation method and cost flow assumption. The type of costs that come into an inventory may be pure historical costing or standard costing.

DEFINITION OF COST ACCOUTING SYSTEM

Meaning & Definition Cost- the amount of expenditure (actual or notional) incurred on, or attributable to a specified thing or activity-CIMA, London Costing-the techniques and processes of ascertaining cost-CIMA, London

Cost Accounting Cost Accounting is the application of accounting and costing principles, methods and techniques in the ascertainment of costs and the analysis of savings and/or excesses as compared with previous experience or with standards-CIMA, London IMPORTANCE OF COST ACCOUNTINGThe limitation of financial accounting has made the management to realize the importance of cost accounting. The importance of cost accounting is as follows:1. Importance to Management Cost accounting provides invaluable help to management. It is difficult to indicate where the work of cost accountant ends and managerial control begins. The advantages are as follows: Helps in ascertainment of cost Cost accounting helps the management in the ascertainment of cost of process, product, Job, contract, activity, etc., by using different techniques such as Job costing and Process costing. Aids in Price fixation By using demand and supply, activities of competitors, market condition to a great extent, also determine the price of product and cost to the producer does play an important role. The producer can take necessary help from his costing records. Helps in Cost reduction Cost can be reduced in the long-run when cost reduction program me and improved methods are tried to reduce costs. Elimination of wastage As it is possible to know the cost of product at every stage, it becomes possible to check the forms of waste, such as time and expenses etc., are in the use of machine equipment and material. Helps in identifying unprofitable activities With the help of cost accounting the unprofitable activities are identified, so that the necessary correct action may be taken. Helps in checking the accuracy of financial account Cost accounting helps in checking the accuracy of financial account with the help of reconciliation of the profit as per financial accounts with the profit as per cost account. Helps in fixing selling PricesIt helps the management in fixing selling prices of product by providing detailed cost information. 2. Importance to Employees Worker and employees have an interest in which they are employed. An efficient costing system benefits employees through incentives plan in their enterprise, etc. As a result both the productivity and earning capacity increases. 3. Cost accounting and creditors Suppliers, investors financial institution and other moneylenders have a stake in the success of the business concern and therefore are benefited by installation of an efficient costing system. They can base their judgment about the profitability and prospects of the enterprise upon the studies and reports submitted by the cost accountant.4. Importance to National Economy An efficient costing system benefits national economy by stepping up the government revenue by achieving higher production. The overall economic developments of a country take place due to efficiency of production.5. Data Base for operating policy Cost Accounting offers a thoroughly analyzed cost data which forms the basis of formulating policy regarding day to day business.ADVANTAGES OF COST ACCOUNTING

The science of cost accounting has developed primarily to serve the needs of the management. The techniques of cost accounting are the best tools by which management may conduct a business towards profitable operations. It is so much allied to management that it is difficult to indicate where the cost accounting ends and managerial control begins.Cost Accounting has many advantages. The following are the most important advantages of a good cost accounting system:

1. Profitable and unprofitable Activities:

In Cost Accounting profitable and unprofitable activities are disclosed. Management can take steps to eliminate or to reduce those activities from which little or no profit is earned. It can change the method of production in order to render such activities more profitable.

2. Classification and Subdivision of costs:

Costs are accumulated and classified by every possible division of business. In a good costing system data regarding costs by functions, departments, processes, jobs or orders, contracts and services can be easily computed. Thus it helps management to ascertain the profitability of each product, sales area, division etc. in order to improve profit.

3. Cost Finding and Price-Fixing:

It provides accurate cost data which help in the fixation of selling price and for submitting quotations. In periods of depression it enables the management to determine the extent to which prices can be reduced.

4. Control of Materials and supplies:

Since in all types of cost accounting, materials and supplies must be accounted for in terms of departments, processes, and units of production or services; a system of receiving, handling, and issuing materials and supplies is an essential part of cost control. This will eliminate or reduce misappropriation, embezzlement, obsolescence, and losses from scrap, defective, and spoiled materials and supplies.

5. Control of Wages and Salaries:

Cost Accounting activities encourage accounting for labour by jobs and by operations. In many manufacturing concerns daily summary reports are prepared to show the number of hours and minutes worked and the wage rate for each worker per job or operation.Cost Accounting is a benefit to the employer by establishing standards to measure the efficiency of labour to assist in assignment of work to employees best fitted for it, and to determine the unit cost of labour arising from each activity.

6. Overhead costs:

The Cost accountant first separates costs into direct and indirect items. Direct costs consists of materials and labour that can be definitely.

7. Helps in adverse periods: Cost accounting helps in the periods of economic recession, trade depression and trade competition. In such periods, the management should concentrate on measures to be taken to minimize loss. While taking decision during such periods, cost accounting extends a helping hand to the management to resolve crisis.8. Price fixation, Floating tenders, Quotations etc.: Cost records play a vital role in fixing the price of a product, service or process. Cost accounting facilitates such task.9. Eliminates wastages: Cost of the article or process at each and every stage can be determined with the help of cost records, thereby minimizing wastages that occur.10. Maximizes profit: Cost accounting helps in maximizing profit, choosing apt approach for its production. Non-profitable lines may be avoided.11. Facilitates comparison: Cost records provide data to compare different periods, which in turn helps the management to take future course of action promptly.12. Preparation of final accounts: Cost records provide the necessary accounting information for the preparation of profit and loss account and balance sheet at specified periods promptly.

13. Inventory control: Costing helps to a great extent with respect to control of stock of raw materials, work-in-progress and finished goods.14. Increasing productivity: Productivity of material and lab our is inevitable for any organization to attain growth and expansion. Costing helps in these areas to increase productivity.15. Enhancing efficiency: As costs are determined at each stage, wastages can be detected and remedial measures can be taken without delay; efficiency of an organization is enhanced, which in turn maximizes the profitability.16. Boon to creditors: Costing records serve as a reliable and authentic document by which creditors (investors, banks and money-lending institutions etc.) can repose faith on business organizations and extend advances without any hesitation and with confidence.17. Beneficial to employees: Costing records are easily accessible and transparent to employees because of which they are benefitted monetarily by way of incentive, bonus etc. This strengthens the cordial relationship between the employer and employee, and industrial peace environment prevails.18. Boost to national economy: Prosperity in industrial sector will reflect in the general economy of any nation by way of increased revenue to the government. Better system of cost accounting paves the way to achieve higher GDP growth of the nation.

OBJECTIVES OF COST ACCOUNTING The main objectives of cost accounting are:1. To determine the cost of a product, process or service2. To analyze, classify and record all expenditures with respect to the cost of product, process or service in order to determine its cost3. To provide necessary information to the management in time4. To provide data needed for periodical preparation of profit and loss account and balance sheets5. To serve as a guide by providing actual data for comparison6. To facilitate price fixation and offering quotations7. To assist budgetary control8. To assist cost control and cost reduction9. To record the relative production results in each unit of plant to examine efficiency10. To provide the basis for production planning and for avoiding wastages of materials and stores11. To provide data for different periods and various volumes of output for effective planning and future expansion of business12. To provide the basis for making decisions such as:1. To shut down or operate2. To make or buy3. To continue with existing plant/machinery or to replace it4. To determine costvolumeprofit relationship13. To assist the management in devising suitable policy decisions in other key areas BASIC DOCUMENT USED IN COST ACCOUNTINGThe following documents are used for collecting and classifying various costs: (1)Material requisition note: A document which authorizes and records the issue of materials for use.(2)Material returns note: A document which records the returns of unused materials.

(3)Material transfer note: A document which records the transfer of materials from one store to another, from one cost centre to another, or from one unit to another.

(4) Material issue analysis sheet: A document which is a classified record of materials issues, returns and transfers.

(5) Lab our Time Record: A document which records the amount of time spent by an employee, showing the analysis between a numbers of activities during a payment period.

(6) Wages analysis Sheet: A document which is a classified record of time and / or wages complied from lab our time records.

(7) Expenses analysis Sheet: A document which classified record of expenses.

(8) Cost journal voucher: A document which provides the details necessary to support an entry in the cost A/C.

(9) Machine Time Record:A document which records the amount of time an items of equipment is operated or remain idle, and the work done by the machine, and which may record the cost of the time so recorded.

CHAPTER 2INTEGRATED SYSTEM OF ACCOUNTSINTRODUCTIONIntegrated accounting system involves the combination of cost accounting and financial accounting records. In this system, only one set of books of accounts are maintained. This set of books fulfils the principles of cost accounting and financial accounting. In this system, nominal accounts follow the principles of cost accounting. Real accounts and personal accounts are kept in accordance with financial accounting principles.Integrated accounting system may be defined as the inter-locking of financial and cost accounting systems to ensure that all relevant expenditure is absorbed into the cost accounts. Under this system, transactions are classified according to both their function and nature. Under this system, double-entry system of book keeping is followed for recording transactions. DEFINTION OF INTEGRATED SYSTEM CIMA has defined integrated system as a system in which the financial and cost accounts are inter-locked to ensure that all relevant expenditure is absorbed into the cost accounts. Under this accounting system transactions are classified both according to their function and natures.FEATURES OF INTEGRATED ACCOUNTING: Account budget setup capability Check printing in batch or on demand Electronic check request feature automatically creates an Accounts Payable record Recurring journal entries tool Payroll import functionality Search and view accounts by date range, accounting period or any other aspect Print or export grid results to Excel Trial balance, income statement, balance sheet and statement of cash flows capabilities Trust balances by matter Ability to transfer monies between trust accounts Support for multiple checking accounts with different check formats per account Bank statements can be downloaded for reconciliation Track and manage vendor and payee relationships Process 1099 information Account-split capabilities to automatically distribute a check or adjustment among multiple accounts Compensation formulas automate the splitting of fee income postings Support for matter level, client level or partial payments Management of unapplied cash Support for write-offs Group, sort or filter search results Period-based analysis ADVANTAGES OF INTEGRAL SYSTEM OF ACCOUNTING1. Duplication of work avoided: Keeping unnecessary accounting records is avoided, by which duplication of accounting work is eliminated to a great extent.2. Saves time and money: Instead of cost ledger, control account, general ledger adjustment account, purchases account and stores ledger account, only one set of books are maintained and thus save time and money.3. Reconciliation problem: As there will be only one figure for profit or loss, the problem of reconciliation of profits, as shown by cost and financial books, will not arise.4. Accuracy: Correct and reliable data can be obtained under this system and as such the results will be more accurate.5. Control on cost: In this system, all expenses are included in cost accounts. It leads to an automatic check on costs and ensures better control over it.DISADVANTAGES OF INTEGRATED SYSTEM :1. This system has to fulfill the requirements of both the cost and the financial accounts. Because of this, it is a complicated procedure.2. In any case, perfect integration cannot be possible.3. This system may not be suitable for large-scale manufacturing factories.PREREQUISITES FOR SUCCESSFUL INTEGRATED SYSTEM OF ACCOUNTING1. Role of management: The role of management is important in the implementation of integrated accounting system. The management has to plan the level of integration and issue guidelines for effective implementation of this system.2. Classification of accounts: Account heads should be duly identified and classified. The accounting data have to be maintained in separate subsidiary ledgers as follows (i) sales ledger (ii) purchases ledger (iii) stores ledger is job ledger (iv) stock ledger (v) overheads ledger and the like.

3. Coding of accounts: To facilitate the task of relevant and speedy information, proper coding of accounts must be done.4. Accounts personnel: Proper training should be provided to accounts department personnel to acquaint with this accounting system.5. Agreed routine

An agreed routine, with regard to the treatment of provision for accruals, prepaid expenses and other adjustments necessary for preparation of interim accounts must be specified.

ACCOUNTING TREATMENTJournal entries: The journal entries that have to be passed under both integral and non-integral accounting systems are shown in the tabular form as follows:Accounting entries in non-integrated accounting system (financial books and cost books) and integrated accounting system.

SOLVED PROBLEM INTEGRATED SYSTEMBangalore petro-chemicals co. keep books on integral accounting system. The following balances appear in the books company as on 1st January 2004.Particular Dr. Rs.Cr. Rs.

Stores control A/C18000

Work in progress A/C17000

Finished goods A/C13000

Bank A/C10000

Creditor A/C8000

Fixed assets A/C55000

Debtors A/C12000

Share capital A/C80000

Depreciation provision A/C5000

Profit and loss A/C32000

TOTAL125000125000

Transactions for the year ended 31st December, 2004 were as under:Particular Rs. Rs.

Wages direct 87000

Indirect 500092000

Purchase of materials (on credit)100000

Materials issues to production110000

Materials for repairs2000

Goods finished during the year (at cost)215000

Sales (on credit)300000

Cost of goods sold220000

Production overheads absorbed48000

Production overheads incurred40000

Administration overheads incurred 12000

Selling overhead incurred 14000

Payments to creditors101000

Payments from debtors290000

Depreciation of machinery 1300

Prepaid rent (included in factory overheads)300

Write up accounts in the integrated ledger and prepare a trial balance.Solution:Dr.Stores control A/CCr.Particular Rs.particularRs.

To balance b/d18000By WIP A/C110000

To creditors A/C100000By production overheads2000

By balance c/d6000

118000118000

Dr.Wages control A/CCr.Particular Rs.Particular Rs.

To bank A/C92000By WIP A/C87000

By production overhead A/C5000

9200092000

Dr. Work in progress A/CCr.Particular Rs. Particular Rs.

To balance b/d17000By finished goods A/C216000

To stores control A/C110000By balance c/d47000

To wages control A/C87000

To production A/C48000

262000262000

Dr. Production overhead A/CCr.Particular Rs. Particular Rs.

To wages control A/C5000By WIP A/C48000

To stores control A/C 2000By prepaid rent 300

To Bank A/C40000

To deprecation provision 1300

4830048300

Dr.Finished goods A/CCr.Particular Rs. Particular Rs.

To balance b/d13000By cost of sales A/C220000

To WIP A/C215000By balance c/d20000

To administration overhead 12000

240000240000

Dr. Administrative overhead A/CCr.Particular Rs.Particular Rs.

To bank A/C12000By finished goods A/C12000

1200012000

Dr.Cost of sales A/CCr.Particular Rs.Particular Rs.

To finished goods A/C220000By sales A/C234000

To selling & distribution A/C14000

234000234000

Dr.Selling and distribution A/CCr.Particular Rs. Particular Rs.

To bank A/C 14000By cost of sale A/C14000

1400014000

Dr.Sales A/CCr.Particular Rs.Particular Rs.

To cost of sales A/C234000By debtors A/C300000

To P/L A/C (profit)66000

300000300000

Dr.Prepaid A/CCr.Particular Rs. Particular Rs.

To production overhead A/C300By balance c/d300

300300

Dr. Depreciation provision A/CCr.Particular Rs. Particular Rs.

To balance c/d6300By balance b/d5000

By production overhead A/C1300

63006300

Dr. Profit and loss A/C Cr.Particular Rs. Particular Rs.

To balance c/d98000By sales A/C 66000

By profit b/d32000

9800098000

Dr.Debtors A/CCr.Particular Rs. Particular Rs.

To balance b/d12000By bank A/C290000

To sales 300000By balance c/d22000

312000312000

Dr.Creditors A/CCr.Particular Rs.Particular Rs.

To bank 101000By balance b/d8000

To balancec/d7000By stores control A/C100000

108000108000

Dr.Bank A/CCr.Particular Rs.Particular Rs.

To balance b/d10000By creditors 101000

To debtors 290000By wages control A/C92000

By production OH A/C40000

By adiministration OH A/C12000

By selling and distribution OH A/C14000

By balance c/d41000

300000300000

Dr.Fixed assets A/CCr.Particular Rs.Particular Rs.

To balance b/d55000By balance c/d55000

5500055000

Trial balance as on 31-12-2004Particular Dr. Rs.Cr. Rs.

stores control A/C6000

WIP A/C47000

Finished goods A/C20000

Bank A/C41000

Creditors A/C7000

Fixed assets A/C55000

Debtors A/C22000

Share capital A/C80000

Deprection provision A/C6300

P and L A/C98000

Prepaid rent A/C3000

191300191300

CHAPTER 3NON INTEGRATED SYSTEM OF ACCOUNTS

INTRODUCTION

Meaning of Non-Integrated Accounts CIMA, London defines it as, a system in which the cost accounts are distinct from the financial accounts, the two sets of accounts being kept continuously in agreement or readily recognizable Also known as independent system, separate books system, cost ledger system, interlocking accounting system or traditional system

FEATURES OF NON- INTEGRATED SYSTEM

Features of Non-Integrated System Separate set of books for costing and for financial accounting for cost accounting, source of information is the same as financial accounting Cost accounts records only coasts, which are a part of Nominal Accounts For other accounts, cost control accounts or adjustment accounts are maintainedBooks of Accounts Main Ledger: Cost Ledger: contains control accounts and nominal accounts other than Stores Ledger, WIP Ledger and Finished Goods Ledger Subsidiary Ledgers: Stores Ledger, WIP Leger and Finished Goods Ledger Role of general Ledger Adjustment Account Also known as Cost Ledger Control Account or Finance Ledger Control Account It is the counterbalancing account for the stocks of material, work-in-progress, and finished goods

1. Separate booksIn a non-integrated cost accounting system there are separate cost accounting cost journals and cost ledgers.

2. Principal of double- entry However, it too follows the fundamental principles of double entry book-keeping for this purpose.

3. Cost manualAs the number and types of transactions involved in accounting are numerous, a number of individuals are employed in their recording and analysis. A cost manual is prepared for guidance of the staff.

4. Voucher As in the case of financial accounting system, transactions are recorded in the cost journal voucher, which provides the details necessary to support an entry in the cost accounts.

5. Account/codeEach entry is debited/credited to a cost accounts. CIMA has defined a cost accounts as an account in the cost ledger. Each account may be given a cost code.

6. Journal These vouchers are first entered into cost journals. There may be one general journal to summaries all original entries or separate journals may be kept to record lab our, material and overhead transactions.

7. LedgerFrom the cost journals, entries are posted in the cost ledger. CIMA has defined a cost ledger as a ledger whose accounts record those transactions which are included in costs. In financial accounting, ledger may be divided into general and subsidiary ledgers like debtors ledger, creditors ledger etc. Similarly, cost ledger may be divided into main and subsidiary ledger. There may be a main ledger known as cost ledger and other subsidiary ledgers like stores ledger, work in progress ledger and finished stock ledger.

CONTROL ACCOUNTS The cost ledger contains two of accounts to complete the double entry :(a) Cost ledger control A/C(b) Three cost control A/C

(A)Cost ledger control A/C :

CIMA has defined a cost ledger control account as an account which is maintained in the principal ledger which records the totals of the transactions recorded in detail in the cost legder and provides a check on the accurancy of the latter. Cost ladger control A/C helps to record all Items of income and expenditure.The function of this account which is also referred to as General ledger Adjustment Account or nominal legder control A/C, is quite important in a cost accounting system.

(b)cost control accounts : The three cost control account stores ledger control accounts, work-in-progress control account and finished goods control A/C help to exercise control over the concerned subsidiary ledger. Transactions kept in details in one or more A/C of the subsidiary ledger are posted in totals, at the end of a period, to the control.(1)stores ledger control A/C(1)records material cost : The account records materials transactions.(2)debit and credit : Receipts are posted from goods received notes from materials requistions or materials issue analysis sheet. The account also record issues of materials to outside parties, returns through return notes, and stores adjustment through material transfer notes.(3)Balance : The balance of this account represents the total balance of stock which should agree with the aggregate of the balance of indiviuals foilos in the stores ledger. (2)wages control A/C(1)Records labour cost : this account records labour transaction.(2)debits & credits : entries are made from wages analysis sheet. The account is debited with the gross wages and is cleared by the transfer of direct labour labour to WIP and indirect labour to factory, administration and selling and distribution overhead control A/C or research and development A/C or capital A/C as the case may be.(3)factory overhead control A/C(1)Records overhead costs : this account deals with manufacturing overhead expenses.(2)Debits & credits : To this account is debited the amount of indirect material, indirect labour, and indirect expenses incurred. The figures are obtained from materials issue analysis sheet. Where separate overhead applied account is opened, credit is given to this account.(4)work-in-progress control A/C(1)Debits : This account is debited with the opening balance of work-in-progress, and material, labour and factory overhead costs.(2)credit : This account is credited with the cost of finished goods.(3)balance : The balance of this account represents unfinished closing stock in process carried over.(5)finished goods control A/C (1)Debits : This A/C is debited with the opening balance of finished goods; the cost of finished goods for the period transfred from the work in progress control A/C And the amount of administration overhead recovered, if administration overhead is not treated as period cost. (2)Credits : It is credited with the cost of sales (by transfer to cost of sales accounts) (3)balance : The balance of the A/C after writing back the unrecovered administration overheads, represents unsold stock carried over.(6)Administration overhead A/C : (1)Debits : administration overhead cost is debited to this A/C. (2)Credit : the amount of overhead recovered in the finished goods sold is credited. Another methods is to close the administration overhead A/C by transfer to costing profit And loss A/C. In this case, no amount of administration cost is charged to the finished goods A/C.(7)Cost of sales A/C (1)Debit : This A/C is debited with the cost of goods sold and selling and distribution overhead recovered. (2)Credit : It is closed by transfer to costing Profit And loss A/C.

(8)Selling and distribution overhead A/C : (1)Debit : selling and distibution costs are debited to the selling and distribution overhead A/C. (2)Credit : As the end of the period, the account is closed by transfer to cost of sales A/C.(9)Overhead adjustment A/C : (1)Debits & Credits : The amount of under absorbed or over absorbed factroy, administration, selling and distribution overhead may be debited or credited to this A/C. (2)Balance : The balance at the end of a period, may be either (i) carried over to the next accounting period, (ii) or transferred to costing profit and loss A/C, (iii) or prorated to cost of sales A/C, WIP A/C And finished stock A/C(10)costing profit and loss A/C (1)Debits and credits : The A/C records the transfer of the amounts of under-absorbed and over-absorbed overhead, the sale value of goods sold, and the balance from the cost of sales A/C. abnormal losses or gains to be kept out of costs are also debited or credited to the A/C. (2)Balance : The closing balance of this A/C represents the closing profit and loss which should be reconciled with the financial profit and loss.

SOLVED PROBLEM NON INTEGRATED SYSTEMProblem no 1.Cost man Ltd. Maintain separate set of books for financial accounts and cost accounts. The following information is furnished for the year 2003.Particulars Rs.

Material control A/C60000

W-I-P control A/C90000

Finished good control A/C140000

Cost ledger control A/C290000

Transaction for the year are:

Materials purchased 660000

Materials issued as:

Direct materials 450000

Indirect materials120000

Wages paid allocated as:

Direct materials270000

Indirect materials90000

Production expenses240000

Value of finished goods produced1080000

Closing stock of finished goods 120000

Administration expenses240000

Selling expenses180000

sales1800000

Prepare the necessary control accounts in books of costing records.

Solution:Dr.Cost Ledger Control A/CCr.Particular RsparticularRs

To costing P/L A/C (Sales)1800000By balance b/d290000

To balance c/d 450000By material control A/C660000

By wages control A/C(Direct + indirect wages)360000

By selling and admin expenses420000

By costing P/L A/C280000

By factory overheads control A/C240000

22.5000022,50000

By balance b/d450000

Dr.material control A/CCr.Particular Rs.particularRs.

To balance b/d60000By WIP control A/C

Direct material 450000

To cost ledger control A/C660000 Indirect material 120000570000

By balance c/d150000

720000720000

Dr. WIP control A/CCr.particularRs.particularRs.

To balance b/d90000By finished goods A/c1080000

To material control A/C570000By balance c/d180000

To wages control A/C270000

To factory overhead control A/C330000

12600001260000

Dr. Finished goods control A/C Cr.Particular RsparticularRs.

To balance b/d140000By cost of sales (bal . fig.)1100000

To WIP1080000By balance c/d120000

12200001220000

Dr.Factory overhead control A/CCr.particularRsparticularRs.

To wages control A/C(Indirect cost) 90000By WIP 330000

To cost ledger control A/C240000

330000330000

Dr.Cost P/L A/CCr.particularRs.particularRs.

To cost of sales (bal. fig.)1100000By cost ledger control A/C1800000

To admin and selling exp. 420000

To cost ledger control A/C(Costing profit) 280000

18000001800000

Dr.Trial balanceparticularDr.Cr.

Cost ledger control A/C450000

Material control A/C150000

WIP control A/C180000

Finished goods control A/C120000

450000450000

ILLUSTRATION 2 A COMPANY operates separate cost accounting and financial accounting system. The following is the list of opening balances as on 1-4-2003 in the cost ledger:Particular Dr. Rs.Cr. Rs.

Stores ledger control A/C53375

WIP control A/C104595

Finished goods control A/C30780

General ledger control A/C188750

Transactions for the quarter ended 30-06-2003 are as under:particularRs.

Materials purchased26700

Materials issued to production40000

Materials issued for factory repairs900

Factory wages paid (including indirect wages Rs. 23000) 77500

Production overheads incurred95200

Production overhead under- absorbed and written-off3200

sales256000

The companys gross profit is 25% on factory cost. At the end of the quarter, WIP stock increased by Rs. 7500.Prepare the relevant control A/C, Costing profit and loss A/C and general ledger adjustment account to record the above transactions for the quarter ended 30-06-2003.

Solution:Dr. General (cost) ledger adjustment A/CCr.particularRs.particularRs.

To sales256000By balance b/d188750

To balance c/d180000By stores ledger control A/C26700

By wages control A/C77500

By overhead control A/C95200

By costing P/L A/C48000

436150436150

Dr.Stores ledger control A/CCr.particularRs.particularRs.

To balance b/d53375By WIP control A/C40000

To general ledger adjustment A/C26700By factory overhead control A/C900

By balance c/d39175

8007580075

Dr. WIP Control A/CCr.Particular Rs.particularRs.

To balance b/d104595By finished goods control A/C202900

To stores ledger control A/C40000By balance c/d112095

To wages control A/C54500

To factory O/H A/C115900

314995314995

Dr.finished goods control A/CCr.particularRs.particularRs.

To balance b/d30780By cost of sale A/C204800

To WIP control A/C202900By balance c/d28880

233680233680

Gross profit is 25% on factory cost or 20% on sales.Hence cost of sales = 256000- 20% of Rs. 256000 =Rs. 204800.

Dr.wages control A/CCr.Particular Rs.ParticularRs.

To general ledger control A/C77500By factory overhead control A/C23000

By WIP control A/C54500

7750077500

Dr.Factory overhead control A/CCr.particularRs. particularRs.

To stores ledger control A/C900By costing P/L A/C3200

To wages control A/C23000By WIP control A/C115900

To general ledger control A/C95200

119100119100

Dr. costing P/L A/CCr.Particular Rs ParticularRs

To factory overhead control A/C3200By sales A/C256000

To cost sales A/C204800

To general ledger control A/C48000

256000256000

Drsales A/CCr.Particular Rs.Particular Rs.

To costing P/L A/C256000To general ledger adjustment A/C256000

256000256000

Dr.cost of sales A/CCr.Particular Rs.particularRs.

To finished goods control A/C204800By costing P/L A/C204800

204800204800

Trial balance (as on 30-6-2003)Particular Dr. Rs. Cr. Rs.

Stores ledger control A/C39175

WIP control A/C112095

Finished goods control A/C28880

General ledger adjustment A/C180150

180150180150

CHAPTER 4 CONCLUSIONCONCLUSION

Integrating existing databases is a very difficult task. Still, it is something that enterprises face today and cannot avoid if they want to launch new applications or to reorganize the existing information system for better profitability. We have discussed basic issues and solutions. We focused on the fundamental concepts and techniques, insisting on the alternatives and on Criteria for choice. More Details are easily found in an over-abundant literature. To the best of our knowledge, no integration tool has yet been developed as a commercial product. Some researchMost enterprises worldview of globalization is mismatched with the reality of globalization today; they bring a proliferation of localized standards when, more than ever, governance, transparency and information integrity need to be maintained consistently throughout the enterprise. By mandating common standards, implementing a standard Chart of Accounts, building common data definitions and deploying common processes across the Finance function, enterprises can transform into IFOs. This will position them to be more responsive, more flexible, and to outperform their peers. To get there, CFOs should take ownership of their Finance processes enterprise wide, simplify their technology and delivery models, and provide a new, single version of the truth to their enterprises. They must formally define their risk programs and take an active role in risk management. For the enterprise to live up to this vision, change and integration will need to come from all areas of the business, not just Finance. With this in mind, the CFO can be a leader in this charge, armed with the facts and trusted with the reins of the enterprise in confident hands.

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