Process

Accounting
Presented to: Prof. Sudha Pandey
Presented by: Apurva Ranjan
Beenu Kumari
Bhawna Gupta
Gopal Parashar
Satyam Tiwari
Process Costing is a method of costing
used mainly in manufacturing.
Where units are continuously mass-
produced through one or more
processes.
Here process is costed.
Introduction
The method used is to take the total
cost of the process and average it over
the units of production.
 Production is continuous.
Output of one product becomes the raw
material of another process and so on.
Output of last process is transferred to
finished stock.
Costs are collected process wise.
Features Both direct and indirect costs are
accumulated in each process.
If there is a stock of semifinished goods
it is expressed in terms of equivalent
units.
Some losses of material are unavoidable
in each process known as Normal Loss.
 Helps determination of cost in each
Advantages process
Average cost can be easily determined
when the methods of production are
standardized.
Cost finding is simpler and less expensive.
Allocation of expenses can be easily made.
Use of standard costing system is very
effective in process costing.
Based on historical cost.
Unfinished units (work in process) at
the end of the period are expressed in
equivalent production units. This
introduces subjective element in
scientific cost determination
Whole concept of process costing
system is based on average costs.
Disadvantages
Average costs do not always reflect the
true costs.
Wide scope of errors while calculating
average costs.
computation of average cost is difficult
where more than one type of products
are manufactured and a division of the
cost elements is necessary.
 Items on Debit side of Process Account:
Opening Balance
Material
Labour
Direct Expenses

Format Indirect Expenses

Abnormal Gain
Items on Credit side of Process Account:
Process Loss : (a) Normal Loss
(b) Abnormal Loss
By Product
Finished Product
Types of Process Accounting
Calculating costs for production units
instead of actual costs.
Actual costs are compared with the total
costs accumulated based on standard Standard
costs, and the difference between the
total costs accumulated and the actual Cost
costs accumulated is recorded and
charged to another account, in this
instance, a variance account.
 Groups together all the costs associated
with production and assigns them to the

Weighted units the company produced

method may not take into account the
Average Cost time period of production and can be the
simplest type of process costing to
calculate.
Focuses on assigning costs to
units in the order that they are
produced.
First In First
Products that are produced first
are assigned a cost first, and
Out (FIFO)
then, they are the first products
to ship or otherwise put out.
 Good luck!

Thank You!