TABANI’S SCHOOL OF ACCOUNTANCY

CMA COST FLOW IN PRODUCTION

Q.1. M/s.Noor Ltd uses a general ledger and a factory ledger. The following transaction took
place:

(i) Purchased Material for Rs.30,000.

(ii) Requisition of Rs.6,000 of Direct Material and Rs.3,000 for indirect Materials.
(iii) Factory Payroll Rs.3,000 (Direct Labor 90% Indirect Labour 10%) was made at the
Home office, Rs.2,500 in cash was sent to the factory, deducting Rs.300 for EOBI
and Rs.200 for Social Security.
(iv) Depreciation of Factory Equipment Rs.300.
(v) Misc. Factory overhead Rs.1,200 paid by the Home office and transferred to the
factory.
(vi) A job was completed in the factory amounting Rs.2,000.
(vii) The completed job was billed to customer for Rs.3,500

Required:
Journal entries on the Factory Books and the General Office Books

Q.2. Amir Company Limited Uses general ledger and factory ledger. The following transactions
took place during the month of April 2018:

(1) Purchased Material Rs.160,000 and other manufacturing supplies Rs.40,000 on

account.
(2) Material requisition for production order Rs.120,000 & for manufacturing supplies
Rs.30,000.
(3) The Factory payroll for the month was Rs.200,000 for direct labour and Rs.40,000 for
indirect labour. Employee’s provident fund deduction 5% and income tax 10% of the
gross payroll were recorded at the home office books.
(4) A transfer from the home office shows the following expenses to be recorded:

Insurance on factory building (prepaid account in general office books). Rs.70,000

Depreciation on factory building Rs.80,000
Other Factory Overhead cost incurred on account Rs.50,000

(5) Factory overhead is applied to production @110% of direct labour cost.

(6) Jobs completed to the extent of Rs.600,000.
(7) Finished goods costing Rs.500,000 were sold on account at a gross profit of 40% on
cost.

Required:
Pass journal entries on the factory books and the general office books.

Q.3. Salman Mills Ltd, with its Head Office at Karachi Defence and Factory at Korangi Industrial
Area maintains Factory Ledger and General Ledger. Prepare Journal Entries to record the
following transactions in the Head Office books or factory office books:

(i) Material purchased Rs.230,000

(ii) Material was consumed for direct purpose Rs.150,000 and for indirect purpose
Rs.20,000.
(iii) Payroll consisting of direct labour of Rs.400,000, indirect labor Rs.20,000, Sales
salaries Rs.13,000 & Office Salaries Rs.17,000 were paid after deducting 10%
income tax and 5% provident fund.
(iv) Finished goods costing Rs.150,000 were sold for Rs.200,000.

Required:
Pass journal entries on the factory books and the general office books.
From the desk of Sir Majid Masood Page 1 of 1