CCMA College P. Ltd.

NON- INTEGRATED ACCOUNTS

Coverage:
-​Basic concept of Integrated and non-integrated accounts
-Principles of non-integrated accounts
-Journal and ledger under non-integrated accounts
-Profit reconciliation of cost and financial accounts

Basic Concept/Introduction

To operate business operations efficiently and successfully, it is necessary to make use of an appropriate
accounting system. Such a system should state in clear terms whether cost and financial transactions should be
integrated or kept separately (Non-integrated).

Integrated A/C: Where cost and financial accounting records are integrated, the system so evolved is known as
integrated or integral accounting. Integrated accounts provide or meet out fully the information requirement for
Costing as well as for Financial Accounts.
For Costing it provides information useful for ascertaining the Cost of each product, job, process, operation of any
other identifiable activity and for carrying necessary analysis.
For financial accounting it provides relevant information which is necessary for preparing profit and loss account
and the balance sheets as per the requirement of law and also helps in exercising effective control over the
liabilities and assets of its business.

Non-Integrated A/C: In case cost and financial transactions are kept separately, the system is called
Non-Integrated Accounting or Cost control System. While non-integrated system of accounting necessitates
reconciliation between financial and cost accounts.
Under such a system the cost accounts restrict itself to recording only those transactions which relate to the
product or service being provided. Hence items of expenses which have a bearing with sales or, production or for
that matter any other items which are under the factory management are the ones dealt with in such accounts. This
leads to the exclusion of certain financial expenses like interest, bad debts and revenue/income from ‘other than
the sale of product or service’.

Reconciliation: ​In the Non-Integral System of Accounting, since the cost and financial accounts are kept
separately, the profit calculated under these account will be different, so it is imperative that those should be
reconciled, otherwise the cost accounts would not be reliable. The reason for differences in the cost & financial
accounts can be of purely financial nature (Income and expenses) and notional nature.

Advantage of Integrated Accounts:

The main advantages of Integrated Accounts are as follows:
(a) No need for Reconciliation- ​The question of reconciling costing profit and financial profit does
not arise, as there is only one figure of profit.
(b) Less efforts- ​Due to use of one set of books, there is a significant saving in efforts made.
(c) ​Less Time consuming- N ​ o delay is caused in obtaining information as it is provided from
books of original entry.
(d) ​Economical process- ​It is economical also as it is based on the concept of

CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​1

 CCMA College P. Ltd.
“Centralization of Accounting function”.

Essential pre-requisites for Integrated Accounts:

The essential pre-requisites for integrated accounts include the following steps:
1. The management’s decision about the extent of integration of the two sets of books.
Some concerns find it useful to integrate up to the stage of primary cost or factory cost while other prefer
full integration of the entire accounting records.
2. A suitable coding system must be made available so as to serve the accounting purposes of financial and
cost accounts.
3. An agreed routine, with regard to the treatment of provision for accruals, prepaid expenses, other
adjustment necessary for preparation of interim accounts.
4. Perfect coordination should exist between the staff responsible for the financial and cost aspects of the
accounts and an efficient processing of accounting documents should be ensured.
Under this system there is no need for a separate cost ledger. Of course, there will be a number of subsidiary
ledgers; in addition to the useful Customers’ Ledger and the Bought Ledger, there will be: (a) Stores Ledger; (b)
Stock Ledger and (c) Job Ledger.

Important ledgers under non-integrated accounting system

(a) Cost Ledger -​ This is the principle ledger of the cost department in which impersonal accounts are
recorded. This ledger is made self-balancing by maintaining therein a Control Account for each
subsidiary ledger. This account is also known as General Ledger Adjustment Account. This account is
made to complete double entry. ​All items of expenditure are credited to this account​. Sales are debited to
this account and net profit/loss is transferred to this account. The balance in this account at the end of the
particular period represents the net total of all the balances of the impersonal account.

Control Ledger under financial A/C:​ ​Cash (A), Bank (A), Debtors (A) and Creditors​ (L)

Financial A/C
RM Dr
​ ash/Bank/Creditors cr.
To C

In Cost A/C
RM DR
​ ost Ledger
To C

Cash/Bank/Debtors Dr.
To Finished Goods

Cost Ledger
To FG

(b) Stores Ledger ​- It contains an account for each item of stores. The entries in each account maintained in
this ledger are made from the invoice, goods received note, material requisitions, material received note
etc. Accounts in respect of each item of stores show receipt, issue and balance in physical as well as in
monetary terms.-​ledger maintains ledger for inputs or raw materials

CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​2

 CCMA College P. Ltd.
(c) Work-in-Progress Ledger -​ This ledger is also known as job ledger, it contains accounts of unfinished
jobs and processes. All direct material costs, direct wages and ​absorbed overheads for each job in
progress are posted to the respective job/WIP account. Profit or loss on WIP account (if any) to be
transferred to costing P/L or overhead account as the case may be​.-Production ledger where we have to
put RM, Labour & Factory OH

(d) ​Finished Goods Ledger ​- It contains an account for each item of finished product manufactured or the
completed job. If the finished product is transferred to stores, a credit entry is made in the
work-in-progress ledger and a corresponding debit entry is made in this ledger.
Principal Accounts under Non-Integrated Accounts:
1. Cost Ledger Control Account/General Ledger Adjustment A/C
2. Store Ledger Control A/C -Raw Material A/C
3. WIP Control A/C
4. Finished Goods Control A/C
5. Production OH Control A/C/Factory OH/Mfg. OH
6. Wages Control A/C
7. Admin OH Control A/C
8. Selling & Distribution OH A/C
9. Cost of Sales A/C
10. Costing P/L A/C
11. Overhead Adjustment A/C

Cost Sheet
Raw Material
Direct Wages
Factory/Production/Manufacturing/Works OH
Gross Factory Cost cost of WIP
WIP Adjustment
Factory Cost WIP cost trf to FG
Add: Admin OH
Cost of Production cost of FG production
Adjustment of FG
Cost of Goods Sold FG cost trf to sales
Add: Selling exp
Cost of Sales Cost of Sales
Add: Profit/loss
Sales

Costing Flow-Chart
CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​3
 CCMA College P. Ltd.
Direct

Raw Material

Indirect

Direct

Wages

Indirect
Production Overheads ​(Absorbed) Work In Progress

Admin Overhead Finished Goods

Selling & Dist. OH Cost of Sales

Profit/Loss Sales

Questions for Practice

Questions no. 1
As on 31​st​ March, 1999, the following balances existed in a firm’s Cost Ledger:
Dr. Cr.
Rs. Rs.
Stores Ledger Control A/c 3, 01,435
Work – in – progress Control A/c 1, 22,365
Finished Stock Ledger Control A/c 2, 51945
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
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
Materials issued to production 1, 27,315
Sales return at cost 5,380

CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​4

 CCMA College P. Ltd.
Materials return 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 balance stating what
each balance represent.

Questions no. 2
The following figures are extracted from the Trail Balance of Gogetter Co. on 30​th​ September 1988:
Inventories

Rs. Rs.
Finished stock 80,000
Raw Materials 140,000
Work – in – progress 200,000
Office Appliances 17,400
Plant and Machinery 460,500
Buildings 200,000
Sales 768,000
Sales return and rebates 14,000
Materials purchased 320,000
Freight incurred on materials 16,000
Purchase returns 4,800
Direct labour 160,000
Indirect labour 18,000
Factory supervision 10,000
Repairs and upkeep factory 14,000
Heat, light and power 650,000
Rates and taxes 6,300
Miscellaneous factory expenses 18,700
Sales commission 33,600
Sales traveling 11,000
Sales promotion 22,500
Distribution deptt. – salaries and expenses 18,000
Office salaries and expenses 8,600
Interest on borrowed funds 2,000
Further details are available as follows:

i. Closing Inventories:

Finished goods 115,000

Raw materials 180,000

CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​5

 CCMA College P. Ltd.
Work-in-progress 192,000

ii. Accrued expenses on:

Direct materials 8,000

Indirect materials 1,200

Interest on borrowed funds 2,000

iii. Depreciation to be provided on:

Office appliances 5%

Plant and machinery 10%

Buildings 4%

iv. Distribution of the following costs:

Heat, light and power to factory, office and distribution in the ratio 8:1:1. Rates and taxes two-third to factory
and one-third to office.

Depreciation on buildings to factory, office and selling in the ratio 8:1:1.

With the help of the above information, you are required to prepare a condensed profit and loss statement of
Gogetter Co. for the year ended 30​th​ September, 1998 along with supporting schedules of:

i. Cost of sales
ii. Selling and Distribution Expenses
iii. Administration Expenses
Questions no. 3

In the absence of the Chief Accountant, you have been asked to prepare a months cost

accounts for a company which operates a batch costing system fully integrated with the

financial accounts. The following relevant information is provided to you.

Rs. Rs.
Balances at the beginning of the month:
Stores Ledger control account 25,000
Work in progress control account 20,000
Finished goods control account 35,000
Prepaid Production overheads brought
forward from previous month 3,000

Transactions during the month:

Materials purchased 75,000

CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​6

 CCMA College P. Ltd.
Material issued
To Production 30,000
To Factory Maintenance ​4,000​ 34,000

Materials transferred between batches

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

The production overhead absorption rate is 150% of direct wages charged to

work in progress
Required:
Prepare the following accounts for the month:
(a) Stores Ledger Control Account.
(b) Work in Progress Control Account.
(c) Finished Goods Control Account.
(d) Production Overhead Control Account.
(e) Profit and Loss Account.

Questions no. 4
Form the following details show the necessary accounts in the cost ledger.
Materials Work-in Finished stock
-progress
Rs. Rs. Rs. Rs.
Opening balance 8,000 5,000 10,000
Closing balance 11,000 9,000 12,000
Transactions during the period:
Materials purchased 25,000
Wages paid 10,000
(Including Rs. 2,000 indirect)
CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​7
 CCMA College P. Ltd.
Overheads incurred 8,000
Overhead absorbed 9,000
Sales 50,000

Questions no. 5
On 31​st​ March, 1999 the following balances were extracted from the books of the Supreme manufacturing
company:
Dr. (Rs.) Cr. (Rs.)
Stores ledger Control A/c 35,000
Work-in-progress contract A/c 38,000
Finished goods control A/c 25,000
Cost ledger control A/c 98,000
98,000 98,000
The following transactions took place in April 1999:
Raw Materials: Rs.
Purchased 95,000
Returned to suppliers 3,000
Issued to production 98,000
Returned to stores 3,000
Productive wages 40,000
Indirect labour 25,000
Factory overhead expenses incurred 50,000
Selling and administrative expenses 40,000
Cost of finished goods transferred to warehouse 213,000
Cost of goods sold 210,000
Sales 300,000
Factory overheads are applied to production at 150% of direct wages, any under/over absorbed overhead
being carried forward for adjustment in the subsequent months. All administrative and selling expenses are
treated as period costs and charged off to the profit and Loss account of the month in which they are
incurred.

Show the following accounts:

a) Cost ledger control A/c

b) Stores ledger control A/c
c) Work-in-progress control A/c
d) Finished goods stock control A/c
e) Factory overhead control A/c
f) Costing profit and loss A/c
g) Trial balance as at the April, 1999.

CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​8

 CCMA College P. Ltd.
Questions no. 6
Acme manufacturing Co. Ltd. Opens the costing records, with the balances as on 1​st​ July, 1998 as follows:
Rs. Rs.
Material control A/c 124,000
Work in progress A/c 62,500
Finished goods A/c 124,000
Production overheads A/c 8,400
Administration overhead 12,000
Selling and distribution overhead A/c 6,250
General ledger control A/c 313,150
325,150 325,150
th​
The following are the transactions for the quarter ended 30​ September 1998;
Rs.
Materials purchased 480,100
Materials issued to jobs 477,400
Materials to works maintenance 41,200
Materials to administration office 3,400
Materials to selling department 7,200
Wages direct 149,300
Wages indirect 65,000
Transportation for incoming materials 8,400
Production overheads 242,250
Absorbed overheads production 359,100
Administration overhead 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 958,400
Finished goods sold 977,300
Sales realization 14, 43,300

Make up the various accounts as you envisage in the cost ledger and prepare a Trial Balance as at 30​th
September 1998

Questions no. 7

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;

CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​9

 CCMA College P. Ltd.
i. Incomplete Ledger Entries:

Raw Materials A/c

Work in progress A/c

Creditors A/c

Manufacturing overheads A/c

Finished Goods A/c

ii. Additional Information:

1. The cash – book showed that Rs. 89,200 have been paid to creditors for raw material.
2. Ending inventory of work in progress included material 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 wages rate is 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.

Questions no. 8

CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​10

 CCMA College P. Ltd.
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 30-6-1990.

(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

Questions no. 9

During the physical verification of stores of X Ltd. it was found that 100 units of raw material 'Wye' was
returned to the supplier has not been recorded. Its purchase invoice price is Rs. 5 per unit while the current
standard cost is Rs. 4.80 per unit. Pass necessary journal entry to record the adjustment in the cost ledger
of X Ltd. (Nov., 1997,4 marks)

Question 10

BPR Limited keeps books on integrated accounting system. The following balances appear in the books
as on April 1,2002.

Dr. (Rs.) Cr. (Rs.)

Stores Control A/c 40,950 –

Work-in-progress A/c 38,675 –
Finished Goods A/c 52,325 –
Bank A/c – 22,750

CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​11

 CCMA College P. Ltd.
Creditors A/c 18,200
Fixed Assets A/c 1,47,875 –
Debtors A/c 27,300 –
Share Capital A/c – 1,82,000
Provision for Depreciation A/c – 11,375
Provision for Doubtful Debts A/c – 3,725
Factory Overheads Outstanding A/c – 6,250
Pre-Paid Administration Overheads A/c 9,975 –
Profit & Loss A/c – 72,800
Total 3,17,100 3,17,100

The transactions for the year ended March 31,2003, were as given below:

Rs. Rs.

Direct Wages 1,97,925 --

Indirect Wages 11,375 2,09,300
Purchase of materials (on credit) 2,27,500
Materials issued to production 2,50,250
Material issued for repairs 4,550
Goods finished during the year (at cost) 4,89,125
Credit Sales 6,82,500
Cost of Goods sold 5,00,500
Production overheads absorbed 1,09,200
Production overheads paid during the year 91,000
Production overheads outstanding at the end of year 7,775
Administration overheads paid during the year 27,300
Selling overheads incurred 31,850
Payment to Creditors 2,29,775
Payment received from Debtors 6,59,750
Depreciation of Machinery 14,789
Administration overheads outstanding at the end of year 2,225
Provision for doubtful debts at the end of the year 4,590
Required:

CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​12

 CCMA College P. Ltd.
Write up accounts in the integrated ledger of BPR Limited and prepare a Trial balance. (Nov, 2003, 10
marks)

Question 11
A company operates on historic job cost accounting system, which is not integrated with financial accounts.
At the beginning of a month, the opening balances in cost ledger were.
Rs. (in lakhs)

Stores Ledger Control Account 80

Work-in-Progress Control Account 20
Finished Goods Control Account 430
Building Construction Account 10
Cost Ledger Control Account 540

During the month, the following transactions took place:

Material -- Purchased 40
Issued to production 50
Issued to general maintenance 6
Issued to building construction 4
Wages- Gross wages paid 150
Indirect wages 40
For building construction 10
Works Overheads- Actual amount incurred (excluding items shown above) 160

Absorbed in building construction 20

Under absorbed 8
Rayalty paid 5
Selling, distribution and administration overheads 25
Sales 450
At the end of the month, the stock of raw material and work-in-progress was Rs. 55 lakhs Rs. 25 lakhs
respectively. The loss arising in the raw material account is treated as factory overhead. The building under
construction was completed during the month. Company’s gross profit margin is 20% on sales.

Prepare the relevant control accounts to record the above transactions in the cost ledger of

company. (May, 1996, 16 marks

Question 12

CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​13

 CCMA College P. Ltd.
The following figures are extracted from the Financial Accounts of Sellwel Ltd. For the year ended
31-12-1984:

Rs. Rs.

Sales (20,000 units) 50,00,000

Materials 20,00,000
Wages 10,00,000
Factory Overheads 9,00,000
Administrative Overheads 5,20,000
Selling and Distribution Overheads 3,60,000
Finished Goods (1,230 units) 3,00,000
Work-in-progress:

Materials 60,000

Labour 40,000

Factory Overheads 40,000 1,40,000

Goodwill Written off 4,00,000

Interest paid on capital 40,000

In the costing records, Factory Overhead is charged at 100% of Wages, Administration Overhead 10%
factory cost and Selling and Distribution Overhead at the rate of Rs. 20 per unit sold.

Prepare a statement reconciling the profit as per Cost Records with the profit as per Financial Records.

Question 13

The following information is available from the financial books of a company having a normal production
capacity of 60,000 units for the year ended 31st March, 1995:

(i) Sales Rs. 10,00,000 (50,000 units).

(ii) There was no opening and closing stock of finished units.

(iii) Direct material and direct wages cost were Rs. 5,00,000 and Rs. 2,50,000 respectively.

(iv) Actual factory expenses were Rs. 1,50,000 of which 60% are fixed.

(v) Actual administrative expenses were Rs. 45,000 which are completely fixed.

(vi) Actual selling and distribution expenses were Rs. 30,000 of which 40% are fixed.

(vii) Interest and dividends received Rs. 15,000.

CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​14

 CCMA College P. Ltd.

You are required to:

(a) Find out profit as per financial books for the year ended 31st March, 1995;
(b) Prepare the cost sheet and ascertain the profit as per cost accounts for the year ended 31st
March, 1995 assuming that the indirect expenses are absorbed on the basis of normal
production capacity; and
(c) Prepare a statement reconciling profits shown by financial and cost books.(May, 1995, 16
marks)

Question 14

The following figures have been extracted from the cost records of a manufacturing company:

Stores Rs.

Opening Balance 63,000

Purchases 3,36,000
Transfer from Work-in-progress 1,68,000
Issues to Work-in-progress 3,36,000
Issues to Repairs and Maintenance 42,000
Deficiencies found in Stock taking 12,600
Work-in-progress:

Opening Balance 1,26,000

Direct Wages applied 1,26,000
Overhead Applied 5,04,000
Closing Balance 84,000
Finished Products:

Entire output is sold at a Profit of 10% on actual cost from work-in-progress.

Others: Wages incurred Rs. 1,47,000; Overhead incurred Rs. 5,25,000.

Income from investment Rs. 21,000; Loss on sale of Fixed Assets Rs. 42,000.

Draw the stores control account, work-in-progress control account, costing profit and loss account, profit
and loss account and reconciliation statement. (May 2008,10 marks)

Question 15

CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​15

 CCMA College P. Ltd.
The following figures have been extracted from the Financial Accounts of a Manufacturing Firm for the first
year of its operation:

Rs.

Direct Material Consumption 50,00,000

Direct Wages 30,00,000
Factory Overheads 16,00,000
Administrative Overheads 7,00,000
Selling and Distribution Overheads 9,60,000
Bad Debts 80,000
Preliminary Expenses written off 40,000
Legal Charges 10,000
Dividends Received 1,00,000
Interest Received on Deposits 20,000
Sales (1,20,000 units) 1,20,00,000
Closing Stocks:
Finished Goods (4,000 units) 3,20,000
Work in Progress 2,40,000
The cost accounts for the same period reveal that the direct material consumption was Rs. 56,00,000.
Factory overhead is recovered at 20% on prime cost. Administration overhead is recovered at Rs. 6 per unit
of production. Selling and distribution overheads are recovered at Rs. 8 per unit sold.

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

Question 16
A manufacturing company disclosed a net loss of Rs. 3,47,000 as per their cost accounts for the year ended
March 31,2003. The financial accounts however disclosed a net loss of Rs. 5,10,000 for the same period.
The following information was revealed as a result of scrutiny of the figures of both the sets of accounts.’
Rs.

(i) Factory Overheads under-absorbed 40,000

(ii) Administration Overheads over-absorbed 60,000
(iii) Depreciation charged in Financial Accounts 3,25,000
(iv) Depreciation charged in Cost Accounts 2,75,000
(v) Interest on investments not included in Cost Accounts 96,000
(vi) Income-tax provided 54,000
(vii) Interest on loan funds in Financial Accounts 2,45,000
(viii) Transfer fees (credit in financial books) 24,000
(ix) Stores adjustment (credit in financial books) 14,000
CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​16
 CCMA College P. Ltd.
(x) Dividend received 32,000
Prepare a memorandum Reconciliation Account (May, 2003, 8 marks)

Additional Question for Practice

Question No. 1
The following is the Trading and Profit & Loss Account of Omega Limited:

Dr. Cr.
Particulars Rs. Particulars Rs.
To materials consumed 23,01,000 By Sales 48,75,000
To Direct wages 12,05,750 (30,000 units)

To Production Overheads 6,92,250 By Finished goods

To Administration Overheads 3,10,375 Stock (1,000 units) 1,30,000
To Selling and Distribution 3,68,875 By Work-in-progress:
Overhead
To preliminary Expenses written 22,750 Materials 55,250
off
To Goodwill written off 45,500 Wages 26,000
To Fines 3,250 Production
To Interest on Mortgage 13,000 Overheads 16,250 97,500
To Loss on Sale of machine 16,250 By Dividends received 3,90,000
To Taxation 1,95,000
To Net Profit for the year 3,83,500 By Interest on bank 65,000
deposits
55,57,500 55,57,500
Omega Limited Manufactures a Standard Unit.
The Cost Accounting records of Mega Ltd. show the following:
(i) Production overheads have been charged to work-in-progress at 20% ON Prime cost.
(ii) Administration Overheads have been recovered at Rs. 9.75 per finished Unit.
(iii) Selling & distribution Overheads have been recovered at Rs. 13 per Unit sold.
(iv) The Under-or Over-absorption of Overheads has not been transferred to costing P/L
A/c.
Required:
(i) Prepare a proforma Costing Profit & Loss account, indicating net profit.
(ii) Prepare Control accounts for production overheads, administration Overheads and
selling & distribution Overheads.
(iii) Prepare a statement reconciling the profit disclosed by the cost records with that
shown in financial accounts.
Answer:

CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​17

 CCMA College P. Ltd.
i. Net profit: 2,14,500
ii. Production OH :7,01,350 Administration OH= 3,10,375 and Selling & Distribution OH:
3,90,000
iii. Profit as per financial A/c: 38,83,500

Question No. 2
ABC Ltd. has furnished the following information from the financial books for the year ended 31st
March, 2007:
Profit & Loss Account

Rs. Rs.
To Opening stock By Sales (10,250 units) 28,70,000
(500 units at Rs.140 each) 70,000 By Closing stock
Material consumed 10,40,000 (250 units at Rs. 200 each) 50,000
Wages 6,00,000
Gross profit c/d 12,10,000
29,20,000 29,20,000
To Factory overheads 3,79,000 By Gross profit b/d 12,10,000
Administration overheads 4,24,000 Interest 1,000
Selling expenses 2,20,000 Rent received 40,000
Bad debts 16,000
Preliminary expenses 20,000
Net profit 1,92,000
12,51,000 12,51,000

The cost sheet shows the cost of materials at Rs. 104 per unit and the labour cost at Rs. 60 per unit.
The factory overheads are absorbed at 60% of labour cost and administration overheads at 20% of
factory cost. Selling expenses are charged at Rs. 24 per unit. The opening stock of finished goods is
valued at Rs. 180 per unit.
You are required to prepare:

(i) A statement showing profit as per Cost accounts for the year ended 31st March, 2007:
(ii) A statement showing the reconciliation of profit as disclosed in Cost accounts with the
profit shown in Financial accounts.

Non Integrated.. Past Questions of ICAN.

Questino No. 1

Shyam Enterprises operating an integral system of accounting. The following transactions

incurred for the year end 2012. ​(JUNE-2013, 3.B)

CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​18

 CCMA College P. Ltd.
Transaction​ ​Amount (Rs.)

Raw material Purchased (40% in cash) 10, 00,000

Material issued to production 6, 00,000

Wages paid (50% Direct) 2, 00,000

Wages charged to production 1, 20,000

Factory Overhead paid 1, 20,000

Factory Overhead charged to Production 110,000

Selling and distribution overhead paid 30,000

Finished goods finalized at cost 6, 50,000

Sales (70% in credit) 11, 00,000

Closing stock of finished goods -

Payment received from Customer 3, 00,000

Paid to supplier 5, 00,000

You are required to pass journal Entries in the books of Shyam Enterprises under integrated system of
accounting for the period ended 2012. 5

Answer
Journal Entries in the books of Shyam Enterprises under integrated system of accounting for the
period ended 2012.

(Material
purchased)

( Material issued to production)

………………………

Wages Control A/C Rs.200,000

CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​19

 CCMA College P. Ltd.
To Cash/Bank A/C Rs.200,000

(Wages Paid)

.............

Work-in-Progress Control A/C Rs.1,20,000

To Wages Control A/C Rs.1,20,000

(Wages charged to production)

.............

Factory Overhead Control A/C Rs.120,000

To Cash/Bank A/C Rs.120,000

( Factory overhead paid)

.............

Work –in Progress Control A/C Rs.110,000

To Factory Overhead Control A/C Rs.110,000

(Factory overhead charged to production)

.............

Selling and Distribution Overhead Control A/C Rs.30,000

To cash/Bank A/C Rs.30,000

(Selling/distribution overhead paid)

.............

Finished Stock Ledger Control A/C Rs.650,000

To Work-in-progress Control A/C Rs.650,000

(Cost of finished goods transferred from work in progress)

.............

Cost of Sales A/C Rs.6,80,000

To Finished Stock Ledger Control A/C Rs.650,000

To Selling and Distribution control A/C Rs.30,000

.............

CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​20

 CCMA College P. Ltd.
Sundry Debtors Account Rs.770,000

Cash/Bank A/C Rs.330,000

To Sales Control Account Rs.11,00,000

(Finished stock sold)

.............

Cash/Bank Account Rs.300,000

To Sundry Debtors A/C Rs.300,000

( Amount received from customer)

.............

Sundry Creditors A/C Rs.500,000

To Cash/Bank A/C Rs.500,000

( Payment made to creditors)

.............

Question No. 2

The following information is the extracted from the financial accounts of a manufacturing
company for the last financial year: ​(DEC-2012, 3.B)

Rs.'000

Raw material consumed 5,000

Direct wages 3,000

Works overhead 1,600

Office overhead 700

Selling overhead 960

Bad debts 120

Legal charges 10

CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​21

 CCMA College P. Ltd.
Interest received 120

Sales (120,000 units @ Rs.100) 12,000

Closing inventory of WIP 240

Closing inventory of Finished goods (4,000 units) 320

The following information is extracted from the cost accounts for the same financial year:

Raw material consumed- Rs. 5,600,000

Recovery of works overhead- @ 20% on prime cost

Recovery of office overhead- @ Rs. 6 per unit of output

Recovery of selling overhead- @ Rs. 8 per unit sold.

Required: (6+3=9)

i) Prepare financial profit and loss account and Cost sheet for the financial year.
ii) Reconcile the difference in profit under the two sets of accounts.

Answer

Financial Profit & Loss Account

Particular Rs.'000 Particula Rs.'000

s rs

To Raw material consumed 5,000 By Sales 12,00

0

To Direct wages 3,000 By Closing inventory:

To Works overhead 1,600 WIP 240

To Office overhead 700 Finished goods 320

To Selling overhead 960 By Interest received 120

To Bad debts 120

To Legal charges 10
CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​22
 CCMA College P. Ltd.
To Net profit 1,290

12,680 12,68
0

Cost Sheet
For the financial year

Particul Rs.'000 Rs.'000

ars

Raw material consumed 5,60

0

Direct wages 3,00

0

Prime Cost 8,600

Works overhead (20% on Prime cost) 1,720

10320

Less: Closing WIP (240)

Works Cost 10,080

Office overhead (Rs.6 *124,000) 744

Cost of production 10,824

Less: Closing Finished goods (10,824*4000/124000) (349)

Cost of goods sold 10,475

Selling overhead (Rs.8 * 120,000) 960

Cost of sales 11,435

Net profit 565

Sales 12,000

Note: Unit produced = Sold unit + closing inventory

CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​23
 CCMA College P. Ltd.
ii) Reconciliation Statement

Particulars Rs.'000 Rs.'000

Profit as per financial accounts 1,290

Add:

Closing inventory of finished goods overvalued in cost 29

accounts

Bad debts not charged in cost accounts 120

Legal charges not charged in cost accounts 10 159

1449

Less:

Raw material overcharged in cost accounts 600

Works overhead over absorbed in cost accounts 120

Office overhead over absorbed in cost accounts 44

Interest received not included in cost accounts 120 884

Profit as per cost accounts 565

Question No. 3
In a factory, works overheads are absorbed at 60% of labour cost and office overheads are 20 % of
works cost. ​(DEC-2010, CAP-II, 3.B)

You are required to​ prepare the following if total expenditure consists of material Rs. 200,000; wages
Rs. 150,000; factory expenses Rs. 100,000 and office expenses is Rs. 85,000. 10% of the output is in
stock at the end and sales are Rs. 520,000. (3.5+3.5+1=8)
i) Cost sheet,
ii) Trading and Profit and Loss Account, and
iii) Reconciliation Statement

Answer

CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​24

 CCMA College P. Ltd.
i) Cost Sheet

Particulars Amount
Rs.
Material 2,00,000
Wages 1,50,000
Prime Cost 3,50,000
Factory Overhead (60% of Rs. 1,50,000) 90,000
Works Cost 4,40,000
Office Overheads (20% of works cost) 88,000
Cost of Production 5,28,000

Cost of goods sold Rs.

4,75,200
Profit 44,800
Sales 5,20,000
Profit as per accounts= Rs. 44,800
ii) Trading and Profit and Loss Account
Dr. Cr.

Particulars Amount Particulars Amount

Rs. Rs.
To Material 2,00,000 By Sales 5,20,000
To Wages 1,50,000 By Closing Stock

To Gross profit c/d 2,22,800 52,800

5,72,800 5,72,800
To Factory Expenses 1,00,000 By Gross Profit b/d 2,22,800
To Office Expenses 85,000
To Net Profit c/d 37,800
2,22,800 2,22,800

iii) Reconciliation Statement

Rs.
CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​25
 CCMA College P. Ltd.
Profit as per cost accounts 44,800
​ vercharged in Cost accounts: Office overheads
Add: O ​3,000
47,800
Less:​ Undercharged in Cost accounts: Factory Overhead 10,000
Profit as per financial records 37,800

CAP-II/Cost Accounting/CA. Kishor Prasad Bimali ​26