Cost Accounting

Integrated and Non-integrated Accounting (Part – I)

Introduction and Overview
(For B. Com. (H), B. Com. And other Professional Courses, like BBA,CA, CS, CMA, etc.)
By

Mahesh Chandra Sharma

Associate Professor, Department of Commerce
Shaheed Bhagat Singh Evening College
(University of Delhi)
 Cost Accounting

Cost Accounting
System

Non-
Integrated
Integrated

Financial Common Set of

Cost Accounting
Accounting Books for Financial
Books
Books and Cost Accounts
 Non-Integral Accounts

• Separate set of books for Financial Accounts and Cost

Accounts are maintained.
• Cost accounting books can also be maintained on the basis of
double entry system to help in checking the accuracy.
• There are three types of accounts – Personal, Real and
Nominal. In cost accounts, we are mainly concerned with
nominal accounts and few real accounts.
• Rules of Debit and Credit are the same.
• This also facilitates reconciliation of cost and financial accounts.
 Financial Books
There are three important financial ledgers in Financial Books:
1. General Ledger: It contains
a) all real, nominal and personal accounts (except those of trade debtors
and trade creditors),
b) Debtors Ledger control A/c (Total Debtors A/c)
c) Creditors ledger control A/c (Total Creditors A/c)
d) Cost Ledger Control account: This is a memorandum account only. It
records all items of expenditure and income relating to cost accounts. This
account is just a reverse or contra of General Ledger Adjustment A/c,
maintained in the Cost Ledger.
2. Debtors Ledger: It contains personal accounts of all debtors.
3. Creditors Ledger: It contains personal accounts of all creditors.
 Cost Books
I. Subsidiary Ledgers:
• Stores ledger: In this ledger a separate account is opened for
each item of Store. (refer to Materials Chapter)
• Work-in-progress or Job ledger: In this ledger a separate
account is opened for each job and product in process.
Production and costs incurred are recorded.
• Finished goods or Stock Ledger: A separate a/c is opened for
each item of finished goods. (Refer to Process A/c)
(Continued)
 Cost Books

II. Cost Ledger:

Cost Control Accounts:
• Control accounts are the Summary (or Total) Accounts which
are maintained for the subsidiary ledger in the cost books under
non integral system.
• These accounts are prepared on the basis of periodic summary
or total of transactions in the respective subsidiary ledger.
• These accounts are maintained in the cost ledger to complete
the double entry so that the accuracy can be checked.
(Continued)
 Cost Control Accounts
(a) Stores Ledger Control A/c

• In Stores Ledger, a separate account is opened for each item of Material and
Store.
• In cost ledger stores ledger control account is opened pertaining to the subsidiary
ledger—Stores Ledger.
• In this account, total materials/stores received in the Store (Purchases Journal) is
recorded on the debit side and total materials/stores issued out of the
Store (Materials Abstracts) is recorded on the credit side.
• The balance of this account must be tallied with the total of the balances of
individual stores account in the stores ledger.
• If two separate ledgers are maintained for materials and stores respectively, then
two separate control accounts : Materials Ledger Control Account and Stores
Ledger Control Account shall be maintained in cost ledger.
 Cost Control Accounts:
(a) Stores Ledger Control A/c - Examples

Stores Ledger – Individual Accounts of Stores Ledger Control A/c

RM and Stores
1. Purchase of Materials A – Rs. 20,000
Purchase of Materials B – Rs. 27,000
Purchase of Materials C – Rs. 33,000
2. Issue of Materials A – Rs. 10,000
Issue of Materials B – Rs. 15,000
Issue of Materials C – Rs. 12,000
3. Materials A - Returned to Store – Rs. 2,100
Materials C - Returned to Store – Rs. 2,900
To General Ledger Adjustment A/c
(Purchase of Materials) - Rs. 80,000
By General Ledger Adjustment A/c (Issue
of Materials - Rs. 37,000
To General Ledger Adjustment A/c
(Materials Returned from Production to
Store) – Rs. 5,000
 Cost Control Accounts:
(b) Work-progress Ledger Control A/c

• In Work-in-progress Ledger, a separate account is opened for each

job and product and cost of materials, labour and factory expenses
incurred are recorded.
• In cost ledger, work-in-progress ledger control account is opened
pertaining to the subsidiary ledger—Work-in-progress Ledger.
• In this account, total cost of materials, labour and factory overheads
incurred is recorded on the debit side and total cost of completed
jobs is recorded on the credit side.
• The balance of this account must be tallied with the total of the
balances of individual jobs or production or process accounts in the
work-in-progress ledger.
 Cost Control Accounts:
(c) Finished Goods Ledger Control A/c

• In Finished Goods Ledger, a separate account is opened for

quantity and cost of each item of Finished Goods.
• In cost ledger, Finished Goods ledger control account is opened
pertaining to the subsidiary ledger—Finished Goods Ledger.
• In this account, total cost of finished goods is recorded on the
debit side and total cost/price of finished goods sold is recorded
on the credit side.
• The balance of this account must be tallied with the total of the
balances of individual stock accounts in the Finished Goods
ledger.
 Cost Ledger: Cost Control Accounts
(d) General Ledger Adjustment A/c or Cost Ledger Control A/c

• In this account, we record all items of income and expenditures. It is

revers of Cost Ledger Control Account in financial books.
• Personal accounts are shown in financial books and not in cost
books.
• All expenditures are shown on the credit side of this account.
• Sales or incomes are shown on the debit side of this account.
• The balance of this account represents value of stores, stock in hand
and the amount of work in progress.
• The general ledger adjustment account completes double entry in
the cost ledger and hence all such accounts which pertain to fixed
assets or cash or outsiders are posted to this account.
 Cost Books

Cost Control Accounts: (Continued)

e) Wages Control A/c
f) Production Overheads (or Manufacturing Overheads or factory Overheads)
Control A/c
g) Office & Administrative Overheads Control A/c
h) Selling & Distribution Overheads Control A/c
i) Capital WIP Control A/c: This account is to record each item of capital work to be
performed in the factory itself for example producing tools and equipments within the
factory.
 Cost Ledger: Cost Control Accounts
(d) General Ledger Adjustment A/c or Cost Ledger Control A/c

• In this account, we record all items of income and expenditures. It is

revers of Cost Ledger Control Account in financial books.
• Personal accounts are shown in financial books and not in cost
books.
• All expenditures are shown on the credit side of this account.
• Sales or incomes are shown on the debit side of this account.
• The balance of this account represents value of stores, stock in hand
and the amount of work in progress.
• The general ledger adjustment account completes double entry in
the cost ledger and hence all such accounts which pertain to fixed
assets or cash or outsiders are posted to this account.
 Cost Ledger
Other Accounts:
h) Overhead Suspense/Adjustment A/c: It is a summary of all under
absorbed and over absorbed overheads. Under-absorbed overheads
are debited to this A/c and Over-absorbed overheads are debited to
this A/c
i) Cost of Sales A/c: When finished goods are sold they are transferred
to cost of sales account.
j) Costing P & L A/c
Note: Since Direct expenses are directly charged to work in progress
account, so no separate account is maintained for direct expenses.
 THANKS

Continued…….Part -II