COSTING PRACTICE SHEETS BY- CA NITIN GURU

COST ACCOUNTING SYSTEM- Practice Sheet

Question 1. [STUDY MATERIAL
In the absence of the Chief Acco ntant o ha e been asked to prepare a month s cost acco nts for a compan hich
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-Process Control Account 20,000
Finished Goods Control Account 35,000
Prepaid Production Overheads brought forward from previous month 3,000
Transactions during the month:
Materials Purchased 75,000
Materials Issued:
To production 30,000
To factory maintenance 4,000 34,000
Materials transferred between batches 5,000
Total wages paid:
To direct workers
To indirect workers 25,000
5,000 30,000
Direct wages charged to batches 20,000
Recorded non-productive time of direct workers 5,000
Selling and Distribution Overheads Incurred 6,000
Other Production Overheads Incurred 12,000
Sales 1,00,000
Cost of Finished Goods Sold 80,000
Cost of Goods completed and transferred into finished goods during the month 65,000
Physical value of work-in-Process at the end of the month 40,000
The production overhead absorption rate is 150% of direct wages charged to work-in-Process.
Required:
PREPARE the following accounts for the month:
(a) Stores Ledger Control Account.
(b) Work-in-Process Control Account.
(c) Finished Goods Control Account.
(d) Production Overhead Control Account.
(e) Costing Profit and Loss Account.

Solution 1:
(a) Stores Ledger Control Account
(Rs) (Rs)
To Balance b/d 25,000 By Work in Process Control A/c 30,000
To Creditors/ Bank A/c 75,000 By Production OH Control A/c 4,000
By Balance c/d 66,000

1,00,000 1,00,000

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(b) Wages Control Account

(Rs) (Rs)
To Bank A/c 25,000 By Work in Process Control A/c 20,000
(Paid to direct workers) 5,000 ( Charged to Batches) 5,000
To Bank A/c (Paid to indirect By Production OH Control A/c 5,000
workers) By Production OH Control A/c
(Non-productive wages)

30,000 30,000

(c) Production Overhead Control Account

(Rs) (Rs)
To Balance b/d 3,000 By Work in Process Control A/c 30,000
(Prepaid amount) (150% of Direct Wages)
To Stores Ledger Control A/c 4,000
To Wages Control A/c 10,000
(Rs 5,000 + Rs 5,000)
To Bank A/c 12,000
To Costing P&L A/c* 1,000
(Over-absorption, balancing figure)

30,000 30,000

(d) Work-in-Process Control Account

(Rs) (Rs)
To Balance b/d 20,000 By Finished Goods Control A/c 65,000
To Stores Ledger Control A/c 30,000 By Balance c/d 40,000
To Wages Control A/c 20,000 ( Physical Value)
To Production OH Control A/c
(150% of direct wages) 30,000
To Costing P&L A/c 5,000
(Stock Gains)
1,05,000 1,05,000

(e) Finished Goods Control Account

(Rs) (Rs)
To Balance b/d 35,000 By Cost of Goods Sold* A/c 80,000
To Work-in-Process Control A/c 65,000 By Balance c/d 20,000

1,00,000 1,00,000
* Alternatively, Costing Profit & Loss Account

(f) Costing Profit & Loss Account

(Rs) (Rs)
To Finished goods control A/c or By Sales A/c 1,00,000
Cost of Goods Sold A/c 80,000 By Production OH Control A/c 1,000
To Selling & distribution OH A/c 6,000 By Work-in-Process Control A/c 5,000
To Balance c/d 20,000 (Stock gain)

1,06,000 1,06,000

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Notes:
(1) Materials transferred between batches will not affect the Control Accounts.
(2) Non-production time of direct workers is a production overhead and therefore will not be charged to work-in-
Process control A/c.
(3) Production overheads absorbed in work-in-Process Control A c eq als to of
(4) In the work-in-Process Control A/c the excess physical value of stock is taken resulting in stock gain. Stock gain
is transferred to Profit & Loss A/c.

Question 2. [STUDY MATERIAL

Dutta Enterprises operates an Integral system of accounting. You are required to PASS the Journal Entries for the
following transactions that took place for the year ended 30th June, 2020. (Narrations are not required.)
(Rs)
Raw materials purchased (50% on Credit) 6,00,000
Materials issued to production 4,00,000
Wages paid (50% Direct) 2,00,000
Wages charged to production 1,00,000
Factory overheads incurred 80,000
Factory overheads charged to production 1,00,000
Selling and distribution overheads incurred 40,000
Finished goods at cost 5,00,000
Sales (50% Credit) 7,50,000
Closing stock Nil
Receipts from debtors 2,00,000
Payments to creditors 2,00,000

Solution 2:
Journal entries are as follows:
DR. (Rs) CR. (Rs)
Stores Ledger Control A c Dr. 6,00,000
To Payables (Creditors) A/c 3,00,000
To Cash or Bank 3,00,000
Work-in-Process Control A c Dr. 4,00,000
To Stores Ledger Control A/c 4,00,000
Wages Control A c Dr. 2,00,000
To Bank A/c 2,00,000
Factor O erhead Control A c Dr. 1,00,000
To Wages Control A/c 1,00,000
Work-in-Process Control A c Dr. 1,00,000
To Wages Control A/c 1,00,000
Factor O erhead Control A c Dr. 80,000
To Bank A/c 80,000
Work-in-Process Control A c Dr. 1,00,000
To Factory Overhead Control A/c 1,00,000
Selling and Dist. Overhead Control A/c Dr. 40,000
To Bank A/c 40,000
Finished Goods Control A c Dr. 5,00,000
To Work-in-Process Control A/c 5,00,000
Cost of Sales A c Dr. 5,40,000
To Finished Goods Control A/c 5,00,000
To Selling and Distribution Control A/c 40,000
Recei ables Debtors A c Dr. 3,75,000
Bank or Cash A c Dr. 3,75,000
To Sales A/c 7,50,000
Bank A c Dr. 2,00,000

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To Receivables (Debtors) A/c 2,00,000

Pa ables Creditors A c Dr. 2,00,000
To Bank A/c 2,00,000

Question 3. [STUDY MATERIAL

The following figures are extracted from the Trial Balance of Go-getter Co. on 30th September, 2020:
Dr. (Rs) Cr. (Rs)
Inventories:
Finished Stock 80,000
Raw Materials 1,40,000
Work-in-Process 2,00,000
Office Appliances 17,400
Plant & Machinery 4,60,500
Building 2,00,000
Sales 7,68,000
Sales Return and Rebates 14,000
Materials Purchased 3,20,000
Freight incurred on Materials 16,000
Purchase Returns 4,800
Direct employee cost 1,60,000
Indirect employee cost 18,000
Factory Supervision 10,000
Repairs and factory up-keeping expenses 14,000
Heat, Light and Power 65,000
Rates and Taxes 6,300
Miscellaneous Factory Expenses 18,700
Sales Commission 33,600
Sales Travelling 11,000
Sales Promotion 22,500
Distribution Deptt. Salaries and Expenses 18,000
Office Salaries and Expenses 8,600
Interest on Borrowed Funds 2,000
Further details are as follows :
(i) Closing inventories :
Finished goods 1,15,000
Raw Materials 1,80,000
Work in progress 1,92,000
(ii) Outstanding Expenses on :
Direct employee cost 8,000
Indirect employee cost 1,200
Interest on borrowed funds 2,000
(iii) Depreciation to be provided on :
Office Appliances 5%
Plant & Machinery 10%
Buildings 4%
(iv) Distribution of the following costs :
Heat, Light and Power to Factory, Office and distribution in the ratio 8:1:1.
Rates and taxes two thirds to factory, and one third to office.
Depreciation on buildings to Factory, Office and Selling in the ratio 8:1:1.
With the help of the above information , you are required to prepare a condensed Prepare a condensed Profit and Loss
statement of Go- getter Co. for the year ended 30th September, 2020 along with supporting schedules of :
(i) Cost of Sales.
(ii) Selling &Distribution Expenses.
(iii) Administration Expenses.

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Solution 3:
Profit and Loss Statement of Go-getter Company
for the year ended 30th September, 2020
(Rs) (Rs)
Gross Sales 7,68,000
Less: Returns and rebates (14,000) 7,54,000
Less: Cost of Sales [Refer to Schedule (i)] (7,14,020)
Net Operating Profit 39,980
Less: Interest on borrowed funds (2,000+2,000) (4,000)
Net Profit 35,980

(i) Schedule of Cost of Sales

(Rs) (Rs)
Raw Material (Inventory opening balance) 1,40,000
Add: Material Purchased 3,20,000
Add: Freight on Material 16,000
Less: Purchase Returns (4,800) 3,31,200
4,71,200
Less: Closing Raw Material Inventory (1,80,000)
Materials consumed in Production 2,91,200
Direct employee cost (Rs 1,60,000 + Rs 8,000) 1,68,000
Prime Cost 4,59,200
Factory Overheads:
Indirect employee cost (Rs 18,000 + Rs 1,200) 19,200
Factory Supervision 10,000
Repairs and factory up-keeping expenses 14,000
Heat, Light and Power (Rs 65,000 × 8/10) 52,000
Rates and Taxes (Rs 6,300 × 2/3rd) 4,200
Miscellaneous Factory Expenses 18,700
Depreciation of Plant (10% of Rs 4,60,500) 46,050
Depreciation of Buildings (4% of Rs 2,00,000 × 8/10) 6,400 1,70,550
Gross Works Cost 6,29,750
Add: Opening Work-in-Process inventory 2,00,000
Less: Closing Work-in-Process inventory (1,92,000)
Cost of production 6,37,750
Add: Opening Finished Goods inventory 80,000
Less: Closing Finished Goods inventory (1,15,000)
Cost of Goods Sold 6,02,750
Add: Administration Expenses [See Schedule (iii)] 18,870
Add: Selling and Distribution Expenses [See Schedule (ii)] 92,400
Cost of Sales 7,14,020

(ii) Schedule of Selling and Distribution Expenses

(Rs)
Sales Commission 33,600
Sales Travelling 11,000
Sales Promotion 22,500
Distribution Deptt. Salaries and Expenses 18,000
Heat, Light and Power 6,500
Depreciation of Buildings 800
92,400

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(iii) Schedule of Administration Expenses

(Rs)
Office Salaries and Expenses 8,600
Depreciation of Office Appliances 870
Depreciation of Buildings 800
Heat, Light and Power 6,500
Rates and Taxes 2,100
18,870

Question 4. [RTP May 2021, Old Course RTP MAY 2021]

The financial books of a company reveal the following data for the year ended 31 st March, 2020:
(Rs.)
Opening Stock:
Finished goods 625 units 1,06,250
Work-in-process 92,000
01.04.2019 to 31.03.2020
Raw materials consumed 16,80,000
Direct Labour 12,20,000
Factory overheads 8,44,000
Administration overheads (production related) 3,96,000
Dividend paid 2,44,000
Bad Debts 36,000
Selling and Distribution Overheads 1,44,000
Interest received 76,000
Rent received 92,000
Sales 12,615 units 45,60,000
Closing Stock: Finished goods 415 units 91,300
Work-in-process 82,400

The cost records provide as under:

Factory overheads are absorbed at 70% of direct wages.
Administration overheads are recovered at 15% of factory cost.
Selling and distribution overheads are charged at ` 6 per unit sold.
Opening Stock of finished goods is valued at ` 240 per unit.
The company values work-in-process at factory cost for both Financial and Cost Profit Reporting.
Required:
(i) Prepare statements for the year ended 31st March, 2020 showing:
the profit as per financial records
the profit as per costing records.
(ii) PREPARE a statement reconciling the profit as per costing records with the profit as per financial records.

Solution 4:

(i) Statement of Profit as per financial records (for the year ended March 31, 2020)

(Rs.) (Rs.)
To Opening stock of Finished Goods 1,06,250 By Sales 45,60,000

To Work-in-process 92,000 By Closing stock of finished Goods 91,300

To Raw materials consumed 16,80,000 By Work-in-Process 82,400

To Direct labour 12,20,000 By Rent received 92,000

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To Factory overheads 8,44,000 By Interest received 76,000

To Administration overheads 3,96,000
To Selling & distribution overheads 1,44,000

To Dividend paid 2,44,000

To Bad debts 36,000
To Profit 1,39,450
49,01,700 49,01,700

Statement of Profit as per costing records (for the year ended March 31,2020)
(Rs.)
Sales revenue (A) 45,60,000
(12,615 units)
Cost of sales:
Opening stock 1,50,000
(625 units × Rs.240)
Add: Cost of production of 12,405 units 43,28,140
(Refer to working note 2)
Less: Closing stock (1,44,795)
(Rs.43,28,140 × 415 units )/12,405 Units
Production cost of goods sold (12,615 units) 43,33,345
Selling & distribution overheads 75,690
(12,615 units × Rs.6)
Cost of sales: (B) 44,09,035
Profit: {(A) (B)} 1,50,965

(ii) Statement of Reconciliation

(Reconciling the profit as per costing records with the profit as per financial records)
(Rs.) (Rs.)
Profit as per Cost Accounts 1,50,965
Add: Administration overheads over absorbed 1,68,540
(Rs. 5,64,540 Rs. 3,96,000)
Opening stock overvalued 43,750
(Rs.1,50,000 Rs.1,06,250)
Interest received 76,000
Rent received 92,000
Factory overheads over recovered (Rs.8,54,000 Rs. 8,44,000) 10,000 3,90,290
5,41,255
Less: Selling & distribution overheads under recovery 68,310
(Rs. 1,44,000 Rs. 75,690)
Closing stock overvalued 53,495
(Rs.1,44,795 Rs.91,300)
Dividend 2,44,000
Bad debts 36,000 (4,01,805)
Profit as per financial accounts 1,39,450

Working notes:

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1. Number of units produced

Units
Sales 12,615
Add: Closing stock 415
Total 13,030
Less: Opening stock (625)
Number of units produced 12,405

2. Cost Sheet

(Rs.)
Raw materials consumed 16,80,000
Direct labour 12,20,000
Prime cost 29,00,000
Factory Overheads (70% of direct wages) 8,54,000
Factory cost 37,54,000
Add: Opening work-in-process 92,000
Less: Closing work-in-process (82,400)
Factory cost of goods produced 37,63,600
Administration overheads 5,64,540
(15% of factory cost)
Cost of production of 12,405 units 43,28,140
(Refer to working note 1)
Cost of production per unit:
=(Total Cost of Production / No. of units produced)
=(Rs. 43,28,140 / 12,405units ) = Rs.348.90

Question 5. [RTP Nov 2020, Old Course RTP NOV 2020]

A manufacturing company disclosed a net loss of Rs.6,94,000 as per their cost accounts for the year ended March
31,2020. The financial accounts however disclosed a net loss of Rs.10,20,000 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 80,000
(ii) Administration Overheads over-absorbed 1,20,000
(iii) Depreciation charged in Financial Accounts 6,50,000
(iv) Depreciation charged in Cost Accounts 5,50,000
(v) Interest on investments not included in Cost Accounts 1,92,000
(vi) Income-tax provided 1,08,000
(vii) Interest on loan funds in Financial Accounts 4,90,000
(viii) Transfer fees (credit in financial books) 48,000
(ix) Stores adjustment (credit in financial books) 28,000
(x) Dividend received 64,000
PREPARE a memorandum Reconciliation Account.

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Solution 5:
Memorandum Reconciliation Accounts
Dr. Cr.
(Rs.) (Rs.)
To Net Loss as per Costing 6,94,000 By Administration overheads 1,20,000
books over recovered in cost accounts
To Factory overheads under 80,000 By Interest on investment not 1,92,000
Absorbed in Cost Accounts included in Cost Accounts
To Depreciation under 1,00,000 By Transfer fees in 48,000
charged in Cost Accounts Financial books
To Income-Tax not provided 1,08,000 By Stores adjustment 28,000
Cost Accounts (Credit in financial books)
To Interest on Loan Funds in 4,90,000 By Dividend received in 64,000
Financial Accounts financial books
By Net loss as per 10,20,000
Financial books
14,72,000 14,72,000

Question 6. [RTP May 2020, Old Course RTP MAY 2020]

The following are the balances existed in the books of JPG Ltd. for the year ended, 31st March, 2019:
Particulars Dr. Cr.
(Rs.) (Rs.)

Stores Ledger Control A/c 30,00,000

WIP Control A/c 15,00,000
Finished Goods Control A/c 25,00,000
Manufacturing Overheads Control A/c 1,50,000
Cost Ledger Control A/c 68,50,000

During the year 2019-20, the following transactions took place:

Particulars Amount (Rs.)
Finished product (at cost) 22,50,000
Manufacturing Overhead incurred 8,50,000
Raw material purchased 12,50,000
Factory wages 4,00,000
Indirect labour 2,00,000
Cost of sales 17,50,000
Materials issued to production 13,50,000
Sales returned (at cost) 90,000
Material returned to suppliers 1,30,000
Manufacturing overhead charged to production 8,50,000
Required:
PREPARE the following control accounts and Trial balance at the end of the year:
Cost Ledger, Stores Ledger, Work-in-process, Finished Stock, Manufacturing Overhead, Wages and Cost of Sales.

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Solution 6:
Cost Ledger Control Account
Particulars (Rs.) Particulars (Rs.)
To Stores Ledger control A/c 1,30,000 By Balance b/d 68,50,000
To Costing Profit & Loss A/c 17,10,000 By Stores Ledger control A/c 12,50,000
By Wages Control A/c 6,00,000
To Balance c/d 77,10,000 By Manufacturing overhead 8,50,000
control A/c
95,50,000 95,50,000

Store Ledger Control Account

Particulars (Rs.) Particulars (Rs.)
To Balance b/d 30,00,000 By WIP Control A/c 13,50,000
To Cost Ledger control A/c 12,50,000 By Cost Ledger control A/c (return) 1,30,000
By Balance c/d 27,70,000
42,50,000 42,50,000

WIP Control Account

Particulars (Rs.) Particulars (Rs.)
To Balance b/d 15,00,000 By Finished Stock Control A/c 22,50,000

To Wages Control A/c 4,00,000

To Stores Ledger control A/c 13,50,000
To Manufacturing overhead control 8,50,000 By Balance c/d 18,50,000
A/c
41,00,000 41,00,000

Finished Stock Control Account

Particulars (Rs.) Particulars (Rs.)
To Balance b/d 25,00,000 By Cost of Sales A/c 17,50,000
To WIP Control A/c 22,50,000
To Cost of Sales A/c (sales return) 90,000 By Balance c/d 30,90,000
48,40,000 48,40,000

Manufacturing Overhead Control Account

Particulars (Rs.) Particulars (Rs.)
To Cost Ledger Control A/c 8,50,000 By Balance b/d 1,50,000
To Wages Control A/c 2,00,000 By WIP Control A/c 8,50,000
By Costing P&L A/c (under recovery) 50,000
10,50,000 10,50,000

Wages Control Account

Particulars (Rs.) Particulars (Rs.)
To Cost Ledger Control A/c 6,00,000 By WIP Control A/c 4,00,000
By Manufacturing overhead control 2,00,000
A/c
6,00,000 6,00,000

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Cost of Sales Account

Particulars (Rs.) Particulars (Rs.)
To Finished Stock Control A/c 17,50,000 By Finished Stock Control A/c (sales 90,000
return)
By Costing Profit & Loss A/c 16,60,000
17,50,000 17,50,000

Trial Balance
Particulars Dr. Cr.
(Rs.) (Rs.)
Stores Ledger Control A/c 27,70,000
WIP Control A/c 18,50,000
Finished Goods Control A/c 30,90,000
Cost Ledger Control A/c 77,10,000
77,10,000 77,10,000
Working:
Costing P&L Account
Particulars (Rs.) Particulars (Rs.)
To Cost of Sales A/c 16,60,000 By Cost Ledger control A/c 17,10,000
To Manufacturing overhead control 50,000
A/c
17,10,000 17,10,000

Question 7. [Old Course RTP Nov 2019]

As of th September the follo ing balances e isted in a firm s cost ledger hich is maintained separately on a
double entry basis:
Debit (Rs) Credit (Rs)
Stores Ledger Control A/c 15,00,000 -
Work-in-progress Control A/c 7,50,000 -
Finished Goods Control A/c 12,50,000 -
Manufacturing Overhead Control A/c - 75,000
Cost Ledger Control A/c - 34,25,000
35,00,000 35,00,000

During the next quarter, the following items arose:

(Rs)
Finished Product (at cost) 11,25,000
Manufacturing overhead incurred 4,25,000
Raw material purchased 6,25,000
Factory wages 2,00,000
Indirect labour 1,00,000
Cost of sales 8,75,000
Materials issued to production 6,75,000
Sales returned (at cost) 45,000
Materials returned to suppliers 65,000
Manufacturing overhead charged to production 4,25,000
Required:
Prepare the Cost Ledger Control A/c, Stores Ledger Control A/c, Work-in-progress Control A/c, Finished Stock Ledger
Control A/c, Manufacturing Overhead Control A/c, Wages Control A/c, Cost of Sales A/c and the Trial Balance at the end
of the quarter.

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Solution 7:
Cost Ledger Control Account
(Rs) (Rs)
To Store Ledger Control A/c 65,000 By Opening Balance 34,25,00
To Balance c/d 47,10,000 By Store ledger control A/c 6,25,000
By Manufacturing Overhead Control 4,25,000
A/c 3,00,000
By Wages Control A/c
47,75,000 47,75,000

Stores Ledger Control Account

(Rs) (Rs)
To Opening Balance 15,00,000 By Work in Process Control A/c 6,75,000
To Cost ledger control A/c 6,25,000 By Cost Ledger control A/c (Returns) 65,000
By Balance c/d 13,85,000

21,25,000 21,25,000

Wages Control Account

(Rs) (Rs)
To Transfer to Cost Ledger Control 3,00,000 By Work in Process Control A/c 2,00,000
A/c By Manufacturing OH Control A/c 1,00,000

3,00,000 3,00,000

Work-in-Process Control Account

(Rs) (Rs)
To Opening Balance 7,50,000 By Finished Goods Control A/c 11,25,000
To Stores Ledger Control A/c 2,00,000 By Balance c/d 9,25,000
To Wages Control A/c 6,75,000
To Manufacturing OH Control A/c 4,25,000

20,50,000 20,50,000

Finished Goods Control Account

(Rs) (Rs)
To Opening Balance 12,50,000 By Cost of Sales 8,75,000
To Work-in-Process Control A/c 11,25,000 By Balance c/d 15,45,000
To Cost of Sales A/c (Sales Return) 45,000

24,20,000 24,20,000

Manufacturing Overhead Control Account

(Rs) (Rs)
To Cost ledger control A/c 4,25,000 By Opening Balance 75,000
To Wages Control A/c 1,00,000 By Work-in-Process Control A/c 4,25,000
BY Under recovery c/d 25,000

5,25,000 5,25,000

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Cost of Sales Account

(Rs) (Rs)
To Finished Stock Ledger Control A/c 8,75,000 By Finished Stock Ledger Control A/c 45,000
To Wages Control A/c (Sales return)
By Balance c/d 8,30,000

8,75,000 8,75,000

Trial Balance
(Rs) (Rs)
Stores Ledger Control A/c 13,85,000
WIP Control A/c 9,25,000
Finished Stock Ledger Control A/c 15,45,000
Manufacturing Overhead Control A/c 25,000
Cost of Sales A/c 8,30,000
Cost ledger control A/c --- 47,10,000
47,10,000 47,10,000

Question 8. [Nov 2019]

ABS Enterprises produces a product and adopts the policy to recover factory overheads applying blanket rate based on
machine hours. The cost records of the concern reveal the following information
Budgeted production overheads Rs. 10,35,000
Budgeted machine hours Rs. 90,000

Actual machine hours worked Rs. 45,000

Actual production overheads Rs. 8,80,000

Production overheads (actual) include-

Paid to worker as per court's award Rs. 50,000

Wages paid for strike period Rs. 38,000

Stores written off Rs. 22,000

Expenses of previous year booked in current year Rs. 18,500

Production -
Finished goods 30,000 units
Sale of finished goods 27,000 units
The analysis of cost information reveals that 1/3 of the under absorption of overheads was due to defective production
planning and the balance was attributable to increase in costs.

You are required:

(i) To find out the amount of under absorbed production overheads.
(ii) To give the ways of treating it in Cost Accounts.
(iii) To apportion the under absorbed overheads over the items.

Solution 8:
(i) Amount of under absorption of production overheads:
Particular Amount (Rs.) Amount (Rs.)
Total production overheads actually incurred 8,80,000
Less: Amount paid to worker as per court order 50,000
Wages paid for the strike period under an award 38,000

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Stores written off 22,000

Expenses of previous year booked in the current year 18,500 1,28,500
7,51,500
Less: Production overheads absorbed as per machine hour rate 5,17,500
(45,000 hours × Rs.11.50*)
Amount of under- absorbed production overheads 2,34,000
*Budgeted Machine hour rate (Blanket rate) = Rs. 10,35,000 / 90,000 = Rs. 11.50 per hour

(ii) Accounting treatment of under absorbed production overheads:

(a) As 1/3rd of the under absorbed overheads were due to defective production planning, this being abnormal, hence
should be debited to Costing Profit and Loss Account.
Amount to be debited to Costing Profit and Loss Account
= Rs. 2,34,000 × 1/3 = Rs. 78,000.

(b) Balance of under absorbed production overheads should be distributed over Finished goods and Cost of sales by
applying supplementary rate*.
Amount to be distributed = Rs. 2,34,000 × 2/3 = Rs.1,56,000
*Supplementary rate = Rs. 1,56,000 / 30,000 units = Rs. 5.20 per unit

(iii) Apportionment of under absorbed production overheads over Finished goods and Cost of sales:
Particular Units Amount (Rs.)
Finished goods (3,000 units × Rs.5.20) 3,000 15,600
Cost of sales (27,000 units × Rs.5.20) 27,000 1,40,400
Total 30,000 1,56,000

Question 9. [RTP NOV 2021, Old Course RTP NOV 2021]

XYZ Ltd. maintains a non-integrated accounting system for the purpose of management information. The following
are the data related with year 2020-21:
Particulars (Rs in
Opening balances:
- Stores ledger control A/c 24,000
- Work-in-process control A/c 6,000
- Finished goods control A/c 1,29,000
- Building construction A/c 3,000
- Cost ledger control A/c 1,62,000
During the year following transactions took place:
Materials:
- Purchased 12,000
- Issued to production 15,000
- Issued to general maintenance 1,800
- Issued to building construction 1,200
Wages:
- Gross wages paid 45,000
- Indirect wages paid 12,000
- For building construction 3,000

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Factory overheads:
- Actual amount incurred (excluding items shown above) 48,000
- Absorbed in building construction 6,000
- Under-absorbed 2,400
Royalty paid 1,500
Selling, distribution and administration overheads 7,500
Sales 1,35,000
At the end of the year, the stock of raw material and work-in-process was Rs 1,65,00,000 and Rs 75,00,000 respectively.
The loss arising in the raw material account is treated as factory overheads. The building under construction was
completed during the year. Gross profit margin is 20% on sales.

Required:
PREPARE the relevant control accounts to record the above transactions in the cost ledger of the company.

Solution 9:
Cost Ledger Control Account
Particulars (Rs in Particulars (Rs in
To Costing P&L A/c 1,35,000 By Balance b/d 1,62,000
To Building Construction A/c 13,200 By Stores Ledger control A/c 12,000
To Balance c/d 1,44,900 By Wages Control A/c 45,000
By Factory overhead control A/c 48,000

By Royalty A/c 1,500

By Selling, Distribution and 7,500
Administration overheads
By Costing P&L A/c 17,100
2,93,100 2,93,100

Stores Ledger Control Account

Particulars (Rs in Particulars (Rs in
To Balance b/d 24,000 By WIP control A/c 15,000
To Cost Ledger control A/c 12,000 By Factory overheads 1,800
control A/c
By Building construction A/c 1,200
By Factory overhead control A/c 1,500
(bal. fig.) (loss)
By Balance c/d 16,500
36,000 36,000

Wages Control Account

Particulars (Rs in Particulars (Rs in

To Cost Ledger control A/c 45,000 By Factory overhead control 12,000

A/c

By Building Construction A/c 3,000

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By WIP Control A/c (bal. fig.) 30,000

45,000 45,000

Factory Overhead Control Account

Particulars (Rs in Particulars (Rs in

To Stores Ledger control A/c 1,800 By Building Construction A/c 6,000

To Wages Control A/c 12,000 By WIP Control A/c (bal. fig.) 54,900

To Cost Ledger control A/c 48,000 By Costing P&L A/c (under- 2,400
absorption)

To Stores Ledger control A/c 1,500

(loss)

63,300 63,300

Royalty Account
Particulars (Rs in Particulars (Rs in

To Cost Ledger control A/c 1,500 By WIP Control A/c 1,500

1,500 1,500

Work-in-process Control Account

Particulars (Rs in Particulars (Rs in
To Balance b/d 6,000 By Finished goods control A/c 99,900
(bal. fig.)
To Stores Ledger control A/c 15,000
To Wages Control A/c 30,000
To Factory overhead control 54,900
A/c
To Royalty A/c 1,500 By Balance c/d 7,500
1,07,400 1,07,400

Finished Goods Control Account

Particulars (Rs in Particulars (Rs in
To Balance b/d 1,29,000 By Cost of Goods Sold A/c 1,08,000
(Refer working note)

To WIP control A/c 99,900 By Balance c/d 1,20,900

2,28,900 2,28,900

Cost of Goods Sold Account

Particulars (Rs in Particulars (Rsin
To Finished Goods control A/c 1,08,000 By Cost of sales A/c 1,08,000

1,08,000 1,08,000

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Royalty Account
Particulars (Rs in Particulars (Rs in

To Cost Ledger control A/c 1,500 By WIP Control A/c 1,500

1,500 1,500

Work-in-process Control Account

Particulars (Rs in Particulars (Rs in
To Balance b/d 6,000 By Finished goods control A/c 99,900
(bal. fig.)
To Stores Ledger control A/c 15,000
To Wages Control A/c 30,000
To Factory overhead control 54,900
A/c
To Royalty A/c 1,500 By Balance c/d 7,500
1,07,400 1,07,400

Finished Goods Control Account

Particulars (Rs in Particulars (Rs in
To Balance b/d 1,29,000 By Cost of Goods Sold A/c 1,08,000
(Refer working note)

To WIP control A/c 99,900 By Balance c/d 1,20,900

2,28,900 2,28,900

Cost of Goods Sold Account

Particulars (Rs in Particulars (Rsin
To Finished Goods control A/c 1,08,000 By Cost of sales A/c 1,08,000

1,08,000 1,08,000

Building Construction Account

Particulars (Rs in Particulars (Rs in

To Balance b/d 3,000 By Cost Ledger control A/c 13,200

To Stores Ledger control A/c 1,200

To Wages Control A/c 3,000

To Factory overhead 6,000

control A/c

13,200 13,200

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Trial Balance
Particulars Dr. Cr.
(Rs in (Rs in
Stores Ledger Control A/c 16,500
WIP Control A/c 7,500
Finished Goods Control A/c 1,20,900
Cost Ledger Control A/c 1,44,900
1,44,900 1,44,900

Workings:

Cost of Goods sold = Rs 13,50,00,000 x 80 = Rs 10,80,00,000

100

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