CHAPTER 7 NON-INTEGRAL OR COST LEDGER ACCOUNTING SYSTEM INTRODUCTION Just as financial accounting system is maintained with certain objectives in view, cost accounting system is often distinctively maintained with a view to achieve its objectives. All transactions are collected from the same invoices, vouchers or receipts which are also common for financial accounts. Costs are then classified according to functions, departments or products. Though real accounts and nominal accounts are of direct relevance in ascertaining the cost of products, personal accounts and cash or bank account are not directly related to cost ascertainment. When cost accounting system is maintained it involves maintenance of certain books, for recording day-to-day transactions. It is not necessary to maintain cost accounting under double-entry system of book-keeping. However, in order to ensure arithmetical accuracy of data often the principles of double entry system of book-keeping is followed. Under double entry system cost accounts are maintained in the main ledger which is termed as cost ledger. In addition to this, many subsidiary ledgers are also maintained. In the cost ledger, control accounts are maintained pertaining to each subsidiary ledger. In addition to control accounts, two other accounts, viz, cost of sales account and costing profit and loss account are also maintained in the cost ledger, in order to match cost with revenue. Apart from these accounts, a general ledger adjustment account is opened in cost ledger to accommodate entries relating to transactions adjustable against cash, bank, debtors, creditors etc. Entries in the accounts are made once in each accounting period on the basis of periodical totals of transactions contained in subsidiary ledgers. INTERLOCKING SYSTEM There two systems of maintaining cost records, viz, interlocking system and integral accounting system. Under interlocking system, cost records are maintained in a separate set of books independent of financial accounting. The ICMA terminology defines interlocking system of accounting as “a system in which the cost accounting are distinct from the financial accounting. The two sets of accounts being kept continuously in agreement or readily recognizable”. The following are some of the advantages of interlocking accounting system: 1. When separate set of costing books are maintained it facilitates ready accomplishment of its objectives. 2. It avoids the complications of recording the entries if it is integrated with financial accounting. 3. It can be maintained according to convenience as it need not be statutorily maintained. The following are some of the limitations of this accounting system: 349
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CHAPTER 7NON-INTEGRAL OR COST LEDGER
ACCOUNTING SYSTEM
INTRODUCTION
Just as financial accounting system is maintained with certain objectives in view, cost
accounting system is often distinctively maintained with a view to achieve its objectives. All
transactions are collected from the same invoices, vouchers or receipts which are also common
for financial accounts. Costs are then classified according to functions, departments or products.
Though real accounts and nominal accounts are of direct relevance in ascertaining the cost
of products, personal accounts and cash or bank account are not directly related to cost
ascertainment. When cost accounting system is maintained it involves maintenance of certain
books, for recording day-to-day transactions. It is not necessary to maintain cost accounting
under double-entry system of book-keeping. However, in order to ensure arithmetical accuracy
of data often the principles of double entry system of book-keeping is followed. Under double
entry system cost accounts are maintained in the main ledger which is termed as cost ledger.
In addition to this, many subsidiary ledgers are also maintained. In the cost ledger, control
accounts are maintained pertaining to each subsidiary ledger. In addition to control accounts,
two other accounts, viz, cost of sales account and costing profit and loss account are also
maintained in the cost ledger, in order to match cost with revenue. Apart from these accounts,
a general ledger adjustment account is opened in cost ledger to accommodate entries relating
to transactions adjustable against cash, bank, debtors, creditors etc. Entries in the accounts
are made once in each accounting period on the basis of periodical totals of transactions
contained in subsidiary ledgers.
INTERLOCKING SYSTEM
There two systems of maintaining cost records, viz, interlocking system and integral accounting
system. Under interlocking system, cost records are maintained in a separate set of books
independent of financial accounting. The ICMA terminology defines interlocking system of
accounting as “a system in which the cost accounting are distinct from the financial accounting.
The two sets of accounts being kept continuously in agreement or readily recognizable”.
The following are some of the advantages of interlocking accounting system:
1. When separate set of costing books are maintained it facilitates ready accomplishment
of its objectives.
2. It avoids the complications of recording the entries if it is integrated with financial
accounting.
3. It can be maintained according to convenience as it need not be statutorily maintained.
The following are some of the limitations of this accounting system:
349
350 METHODS AND TECHNIQUES OF COSTING
1. When cost accounting is independently maintained, it amounts to duplication of expenses
along with financial accounting.
2. The profit shown by cost books may vary with that shown by financial accounting.
This requires reconciliation which involves time and effort.
The integral accounting system is discussed in a separate chapter.
ENTRIES TO RECORD TRANSACTIONS UNDER INTERLOCKING SYSTEM
1. Materials(a) Purchase of materials for stock (cash or credit basis):
Stores ledger control a/c Dr.
To General Ledger adjustment a/c
(b) Returns to suppliers:
General ledger adjustment a/c Dr.
To stores ledger control a/c
(c) Materials purchased specifically for a job (i.e., direct issue)
Work-in-progress control a/c Dr.
To General ledger adjustment a/c
(d) Direct material issued from stores to Job:
Work-in-progress control a/c Dr.
To stores ledger control a/c
(e) Materials returned from jobs to stores:
Stores ledger control a/c Dr.
To work-in-progress a/c
(f ) Issue of indirect materials:
Factory overhead control a/c Dr.
To stores ledger control a/c
(g) Transfer of materials from one job to another:
Receiving job a/c Dr.
To giving job
(h) Normal wastage of materials and stores:
Factory overhead control a/c Dr.
To stores ledger control a/c
(i) Abnormal wastage of materials:
Costing P & L a/c Dr.
To stores ledger control a/c
(j) Abnormal gain of materials: Dr.
Stores ledger control a/c
To costing P & L a/c
2. Labour(a) Payment of direct wages:
Wages control a/c Dr.
To General Ledger adjustment a/c
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(b) Allocation of direct labour:
Work-in-progress a/c Dr.
To wage control a/c
(c) Payment of indirect labour cost:
Wage control a/c Dr.
To General ledger adjustment a/c
(d) Allocation of indirect labour cost:
Overhead control a/c Dr.
To wage control a/c
(e) Normal idle time cost:
Factory overhead control a/c Dr.
To wage control a/c
(f) Abnormal idle time cost:
Costing P & L a/c Dr.
To wage control a/c
3. Direct ExpensesWork-in-progress control a/c Dr.
To General ledger adjustment a/c
4. Overheads(a) For recording overhead incurred and accrued:
Factory control a/c Dr.
Administration control a/c Dr.
S & D control a/c Dr.
To General ledger adjustment a/c
(b) Allocation of factory overheads:
Work-in-progress control a/c Dr.
To factory overhead control a/c
(c) Absorption of administration overhead
Finished stock ledger control a/c Dr.
To administration overhead control a/c
(d) Absorption of selling and distribution overhead:
Cost of sales a/c Dr.
To S & D overhead control a/c
(e) If under/over absorbed amounts are carried forward to subsequent year, the balance
of each overhead a/c will have to be transferred to respective overhead suspense (or
reserve) account as follows
(i) Production overhead a/c Dr.
To production overhead suspense a/c
(For over recovery)
(ii) Administration overhead suspense a/c Dr.
To Administration overhead a/c
(For under recovery)
352 METHODS AND TECHNIQUES OF COSTING
(iii)Selling and distribution overhead suspense a/c Dr.
To S & D overhead a/c
(For under recovery)
(f) In case of under/over absorbed overheads are transferred to costing P & L a/c then
the relevant entries will be as follows:
(i) For over recovery:
Overhead control a/c Dr.
To costing P & L a/c
(ii) For under recovery:
Costing P & L a/c Dr.
To overhead control a/c
5. Finished Goods or Completed Jobs(a) Transfer of completed jobs or finished goods produced to finished goods ledger:
Finished stock ledger control a/c Dr.
To work-in-progress control a/c
(b) Transfer of finished goods sold:
Cost of sales a/c Dr.
To finished stock ledger control a/c
(c) Transfer of cost of sales a/c to P & L a/c:
Costing P & L a/c Dr.
To cost of sales a/c
(d) To record sales:
General ledger adjustment a/c Dr.
To costing P & L a/c
6. Transfer of Profit or Loss(a) In case of profit:
Costing P & L a/c Dr.
To General ledger adjustment a/c
(b) In case of loss:
General ledger adjustment a/c Dr.
To costing P & L a/c
LEDGERS MAINTAINED UNDER COST ACCOUNTING SYSTEM
Under cost accounting system the following ledgers are maintained:
1. Cost LedgerIt is the main ledger maintained in the cost department. It contains two accounts, viz
(a) control account for each of the subsidiary ledgers. Some of the control accounts maintained
in this ledger are stores ledger control account, work-in-progress ledger control account, etc.
(b) cost ledger control account to make the cost ledger self balancing.
2. Stores LedgerAll transactions relating to materials are found in this ledger. It contains a separate account
for each item of stores such as raw materials, component parts, indirect materials. The
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concerned material account is debited with materials received and credited with materials
issued. The entries in each account is made from the invoice, materials received note, material
requisition note, etc. The balance in this account represent the cost of unused materials.
3. Work-in-Progress LedgerThis is also known as job ledger. It contains a separate account for each job or work-in-
progress. The elements of cost is debited to this account and is credited with the amount of
finished goods completed and transferred. The balance in this account represent cost of
incomplete job.
4. Finished Goods LedgerThis ledger contains a separate account for each item of finished product or completed job.
This account is debited with the cost of finished product and the amount of administration
overhead absorbed and credited with the cost of goods sold. The balance in this account
shows the closing stock of finished goods in terms of value.
Control AccountsUnder interlocking system, control accounts are maintained in the cost ledger to complete
double entry in cost books. These control accounts are nothing but total accounts or adjustment
accounts summarising mass of information contained in the subsidiary ledgers, i.e., stores
ledger, job ledger and finished stock ledger.
A control account is maintained in the cost ledger so that double entry in the cost ledger
may be completed and make it self-balancing. These control accounts are posted with the
totals of items which have been debited or credited in detail to the accounts in the ledgers
to which they relate. The balance in control accounts represents the total of balances in a
number of accounts of similar nature maintained in that subsidiary ledger to which the
control account relates. For example, the balance in stores ledger control account represents
in aggregate the detailed balances of stores accounts.
In addition to these control accounts for each of the subsidiary ledger, a cost ledger
control account is also kept in cost ledger. This is operated to make the cost ledger self-
balancing.
Advantages1. It provides a check for ensuring that all expenditure is accounted for in cost accounts
with the help of control account.
2. It provides a basis for reconciliation with the financial accounts.
3. It provides a ready means of preparing monthly or periodical balance sheet, profit and
loss account and statistics relating to cost.
IMPORTANT CONTROL ACCOUNTS MAINTAINED UNDER INTERLOCKINGSYSTEM
The various control accounts under interlocking system are as follows:
1. Stores Ledger Control AccountThis account is maintained in cost ledger. This records a summary of the value of stores
received, issued and balances on hand. Receipts are posted from materials received notes to
the debit side of this account. Similarly, issue of materials from material requisition or
354 METHODS AND TECHNIQUES OF COSTING
material abstract is posted to the credit side of the account. Thus for each entry in stores
ledger, there is a corresponding debit or credit, (though in total) in this account. The balance
of this account represents the total balance of stock which should agree with the aggregate
of the balances of individual accounts in the stores ledger.
2. Wages Control AccountThis account records labour transactions in aggregate i.e., direct and indirect wages. This
account is debited with gross wages shown in wages analysis sheet. It is closed by transfer
of direct labour to work-in-progress and indirect labour to overhead, i.e., production
administration or selling and distribution overhead account; as the case may be. Wages paid
for abnormal idle time are transferred to costing profit and loss account.
3. Factory Overhead Control AccountThis account records factory overhead expenses in aggregate. It is debited with the amount
of indirect materials, indirect labour and indirect expenses as available from indirect materials
analysis sheet, wages analysis sheet etc. This account is credited with the amount of overheads
recovered. The balance in the control account represents under or over-absorption which is
transferred to overhead adjustment.
4. Administration Overheads Control AccountThis account is debited with the administrative overheads incurred and credited with the
amount of administrative overhead absorbed by finished goods. Any balance in this account
represent under or over-absorption of administrative overhead which is transferred to overhead
adjustment account.
5. Selling and Distribution Overhead Control AccountThis account is debited with the amount of selling and distribution overhead incurred and
credited by the amount of such overheads absorbed by the cost of sales. Balance in this
account represents under or over-absorption of selling and distribution overhead which is
transferred to overhead adjustment.
6. Overhead Adjustment AccountThis account is debited with under-absorbed overheads and credited with over-absorbed overhead
amount. The net balance in this account is transferred to costing profit and loss account.
7. Work-in-Progress Control AccountThis account represents the total work-in-progress at any time. This account is debited with
the totals of materials, wages and overheads as transferred from the respective control
accounts. This account is credited when a job is completed. Thus, this account shows the total
value of unfinished jobs.
8. Stock Ledger Control AccountThis account contains the summary of all finished goods transactions in total. It is debited
with the cost of finished goods transferred from work-in-progress control account and the
amount of administration overhead absorbed which is transferred from Administration
overhead control account. This account is credited with the total cost of goods sold which is
transferred to the cost of sales account.
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9. Cost of Sales AccountThis account is debited with the cost of goods sold by transfer from finished goods ledger
control account and also by the selling and distribution overhead absorbed. It is closed by
transferring its balance to costing profit and loss account.
10. Costing Profit and Loss AccountThis account reveals the result of the business i.e., profit or loss of the business. This account
is debited with the cost of sales, abnormal losses and under-absorbed overhead and credited
with the sales value, abnormal gain and over-absorbed overhead. The balance in this account
represents profit and loss which is transferred to cost ledger control account.
11. Cost Ledger Control Account or General Ledger Adjustment AccountThis account is also known as financial ledger control account. This account is maintained
to make the cost ledger self-balancing. Cost ledger contains only impersonal accounts. As no
personal accounts are kept and in order to complete double entry, it becomes necessary to
debit or credit all the transactions which arise in financial accounts to cost ledger control
account. In fact, the account represents the personal accounts shown in the financial ledger.
For example, wages are paid to the extent of Rs. 5,000, as no cash or bank account is
maintained in cost ledger, therefore, in order to complete double entry, wages account will
be debited and in place of Bank or cash account. General Ledger Adjustment account in the
cost ledger will be credited. Thus, all the financial transactions on account of material
purchases, wages, salaries and miscellaneous expenses are credited to cost ledger control
account by contra debit to various control accounts. In a similar way all the financial receipts
are debited to this account. Any transfer from cost books to financial books, e.g., cost of
capital, work done in the factory, will also be entered in this account.
The main object of this account is to complete double entry in cost accounting. Therefore,
purely cost accounting transactions say transfer entries with no relations to the finances are
not passed through this account as double entry is already complete. The balance in this
account represents the total of the balances of all personal accounts in the financial ledger.
Problem 1. The following figures have been ascertained from the costing records. You are
required to pass the necessary entries in the cost journal. Assume that a system of maintaining control
accounts prevails in the organisation.
Rs.
(1) Purchases 3,90,000
(2) Carriage inwards 5,850
(3) Stores issued 3,58,800
(4) Productive wages 3,46,320
(5) Unproductive wages 1,21,680
(6) Works on cost 3,48,400
(7) Materials used in repairs 3,120
(8) Cost of completed jobs 12,80,630
Solution:
COST JOURNAL
(1) Stores ledger control a/c Dr. 3,90,000
To general ledger adj. a/c 3,90,000
(Being the entry for purchase of materials)
356 METHODS AND TECHNIQUES OF COSTING
(2) Stores ledger control a/c Dr. 5,850
To general ledger adj. a/c 5,850
(Being carriage inward treated as part of the
cost of materials purchased)
(3) Work-in-progress ledger control a/c Dr. 3,58,800
To stores ledger control a/c 3,58,800
(Being stores issued to production)
(4) Wages control a/c Dr. 3,46,320
To general ledger adj. a/c 3,46,320
(Being payment of wages)
(5) Factory overhead control a/c Dr. 1,21,680
To cost ledger control a/c 1,21,680
(Being indirect wages incurred)
(6) Factory overhead control a/c Dr. 3,48,400
To cost ledger control a/c 3,48,400
(Being works overhead other than indirect wages)
(7) Factory overhead control a/c Dr. 3,120
To stores ledger control a/c 3,120
(Being materials used in repairs)
(8) Finished stock ledger control a/c Dr. 12,80,630
To work-in-progress ledger control a/c 12,80,630
(Being completed production transferred to finished stock)
Problem 2. The following transactions pertaining to materials took place during March 2001 in
ABC Company Ltd. Enter the transactions in the cost books.
(1) Materials purchased
Credit purchases 10,000
Cash purchases 8,000
Credit purchases for job no. 20 1,000
(2) Return to suppliers 500
(3) Direct materials issued to jobs 4,000
(4) Indirect materials issued to jobs 400
(5) Materials returned from jobs to stores 200
(6) Materials transferred from job no. 8 to job no. 12 300
Solution:
COST JOURNAL
(1) (a) Stores ledger control a/c Dr. 10,000
To general ledger adj. a/c 10,000
(Being the amount of credit purchases)
(b) Stores ledger control a/c Dr. 8,000
To general ledger adj. a/c 8,000
(Being cash purchases)
(c) Work-in-progress ledger control a/c Dr. 1,000
To general ledger adj. a/c 1,000
(Being purchases for a special job no. 20)
(2) General ledger adj. a/c Dr. 500
To stores ledger control a/c 500
(Being the return to supplier)
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(3) Work-in-progress ledger control a/c Dr. 4,000
To stores ledger control a/c 4,000
(Being the direct materials issued to jobs)
(4) Factory overhead control a/c Dr. 400
To stores overhead control a/c 400
(Being issue of indirect materials)
(5) Stores ledger control a/c Dr. 200
To work-in-progress control a/c 200
(Being the materials returned from jobs to stores)
(6) Job no. 12 a/c Dr. 300
To job no. 8 a/c 300
(Being the transfer of materials from job no. 8 to job no. 12)
Problem 3. Pass Journal entries in the cost books (non-integrated system) for the following
transactions:
(1) Materials worth Rs. 25,000 returned to stores from job.
(2) Gross total wages paid Rs. 48,000. Employer’s contribution to PF and state insurance amount
to Rs. 2,000. Wages analysis book detailed Rs. 20,000 direct labour, Rs. 12,000 towards
indirect factory labour, Rs. 10,000 towards salaries to office staff and Rs. 8,000 for salaries
to selling and distribution staff. (University of Delhi, B.Com. (Hons.), April 1999)
Solution:
JOURNAL ENTRIES
(i) Stores ledger control a/c Dr. 25,000
To work-in-progress a/c 25,000
(Being raw materials returned to stores)
(ii) Wages control a/c Dr. 50,000
To general ledger control a/c 50,000
(Being payment of wages)
Work-in-progress control a/c Dr. 20,000
Factory overhead a/c Dr. 12,000
Office overhead a/c Dr. 10,000
Selling overhead a/c Dr. 8,000
To wages control a/c 50,000
(Allocation of wages to direct and indirect cost)
Problem 4. As at 31st March 2001, the following balances existed in a company’s cost ledger
Dr. Cr.
Stores ledger control a/c 6,02,870
Work-in-progress control a/c 2,44,730
Finished stock ledger control a/c 5,03,890
Manufacturing overhead control a/c 21,050
Cost ledger control a/c 13,30,440
13,51,490 13,51,490
During the next three months the following items arose
Rs.
(1) Raw materials purchased 2,46,000
(2) Materials returned to suppliers 5,800
(3) Materials issued to production 2,54,630
358 METHODS AND TECHNIQUES OF COSTING
(4) Factory wages 1,01,060
(5) Manufacturing overhead incurred 1,83,020
(6) Indirect labour 43,330
(7) Manufacturing overhead charged to production 1,54,400
(8) Cost of sales 3,71,780
(9) Sales returns at cost 10,760
(10) Finished product at cost 4,21,670
Pass the necessary entries, open ledger accounts and prepare trial balance
Solution:
JOURNAL ENTRIES
(1) Stores ledger control a/c Dr. 2,46,000
To general ledger adj. a/c 2,46,000
(Being materials purchased)
(2) General ledger adj. a/c Dr. 5,800
To stores ledger control a/c 5,800
(Entry for materials returned to suppliers)
(3) Work-in-progress control a/c Dr. 2,54,630
To stores ledger control a/c 2,54,630
(Entry for issue of materials to production)
(4) Wages control a/c Dr. 1,01,060
To general ledger adj. a/c 1,01,060
(Entry for direct wages incurred)
(5) Work-in-progress control a/c Dr. 1,01,060
To wages control a/c 1,01,060
(Entry for direct wages charged to production)
(6) Works overhead control a/c Dr. 1,83,020
To general ledger adj. a/c 1,83,020
(Entry for works overhead incurred)
(7) Works overhead control a/c Dr. 43,330
To general ledger adj. a/c 43,330
(Entry for indirect wages incurred)
(8) Work-in-progress control a/c Dr. 1,54,400
To works overhead control a/c 1,54,400
(Entry for overhead charged to production)
(9) General ledger adj. a/c Dr. 3,71,780
To finished stock ledger control a/c 3,71,780
(Entry for cost of sales)
(10) Finished stock ledger control a/c Dr. 10,760
To general ledger adj. a/c 10,760
(Entry for sales return)
(11) Finished stock ledger control a/c Dr. 4,21,670
To work-in-progress control a/c 4,21,670
(Entry for finished goods transferred)
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GENERAL LEDGER ADJUSTMENT ACCOUNT
To stores ledger control a/c 5,800 By balance b/d 13,30,440
To finished stock ledger control a/c 3,71,780 By stores ledger control a/c 2,46,000
To balance c/d 15,37,030 By wages control a/c 1,01,060
By works overhead control a/c 1,83,020
By works overhead control a/c 43,330
By finished stock ledger control a/c 10,760
19,14,610 19,14,610
STORES LEDGER CONTROL ACCOUNT
To balance b/d 6,02,870 By general ledger control 5,800
To general ledger adj. a/c 2,46,000 By work-in-progress control a/c 2,54,630
By balance c/d 5,88,440
8,48,870 8,48,870
MANUFACTURING OVERHEAD CONTROL ACCOUNT
To general ledger control a/c 1,80,020 By balance b/d 21,050
To general ledger control a/c 43,300 By work-in-progress control a/c 1,54,400
By balance c/d 50,900
2,26,350 2,26,350
WORK-IN-PROGRESS CONTROL ACCOUNT
To balance b/d 2,44,730 By finished stock ledger control a/c 4,21,670
To stores ledger control a/c 2,54,630 By balance c/d 3,33,150
To wages control a/c 1,01,060
To Mfg. overhead control a/c 1,54,400
7,54,820 7,54,820
FINISHED STOCK LEDGER CONTROL ACCOUNT
To balance b/d 5,03,890 By cost ledger control a/c 3,71,780
To work-in-progress control a/c 4,21,670 By balance c/d 5,64,540
To general ledger adj a/c 10,760
9,36,320 9,36,320
TRIAL BALANCE
Dr. Cr.
Cost ledger control a/c 15,37,030
Stores ledger control a/c 5,88,440
Manufacturing overhead control a/c 50,900
WIP control a/c 3,33,150
Finished stock ledger control a/c 5,64,540
15,37,030 15,37,030
360 METHODS AND TECHNIQUES OF COSTING
Problem 5. A fire destroyed some accounting records of a company. You have been able to collect
the following from the spoilt papers/records and as a result of consultation with accounting staff in
respect of January 1997.
(i) Incomplete ledger entries
RAW MATERIALS ACCOUNT
Beginning Inventory 32,000
WORK-IN-PROGRESS ACCOUNT
Beginning Inventory 9,200 Finished stock 1,51,000
CREDITORS ACCOUNT
Closing balance 19,200 Opening balance 16,400
MANUFACTURING OVERHEAD ACCOUNT
Amount spent 29,600
FINISHED GOODS ACCOUNT
Opening Inventory 2,400
Closing Inventory 30,000
(ii) Additional information:
(1) Cash book showed that Rs. 89,200 have been paid to creditors for raw materials.
(2) Ending inventory of work-in-progress included materials Rs. 5,000 on which 300 direct
labour hours have been booked against wages and overheads.
(3) The job card showed that workers have worked for 7,000 hours. The wage rate is Rs.
10 per labour hour.
(4) Overhead recovery rate was Rs. 4 per direct labour hour.
You are required to complete the above accounts in the cost ledger of the company.
(C.A. Inter, May 1997)
Solution:
CREDITORS ACCOUNT
To cash & bank (1) 89,200 By balance b/d 16,400
To balance c/d 19,200 By purchases (Balancing figure) 92,000
1,08,400 1,08,400
WORK-IN-PROGRESS ACCOUNT
To balance b/d 9,200 By finished goods 1,51,000
To raw materials (Balancing figure) 53,000 By balance c/d materials (2) 5,000
To wages (3) 7,000 hrs. × Rs. 10 70,000 Labour (2) (300 hrs. × 10) 3,000