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ADVANCE COSTING

CLASS -2

Chapter: Cost Accounting Records Costing department is concerned with Income and Expenditure relating to business carried on. Here transactions are recorded into on the basis of double entry book keeping principal every debit must have a corresponding credit. It is generally the responsibility of the Cost Accountant to record the costing transactions. Advantages of Cost Accounting: a) Cost control accounts summarise masses of detailed information contained in subsidiary records. The control accounts re very valuable to management in policy formulation. b) It facilates prompt preparation of costing profit and loss account and helps management to know results of operations of the firm. c) A system of internal check exists through the use of various control accounts. This helps detecting errors and thus maintaining accuracy. d) When cost accounts are separately maintained, it is possible to maintain confidentiality of cost data. e) When cost and financial accounts are maintained separately, they help reconciliation of costing profit and loss with that as per financial accounts.

Journal Entries: Material Purchase tk. 20,000 (cash or credit) Debit materials control account 20,000 Credit Cost ledger Account ii) Debit Sore ledger Control Account 20,000 Credit materials control Account Purchase for special job Tk. 1000 Dr. Work in Progress Ledger Control Account 1000 Cr. Cost Ledger Control Account - 1000 Return to Creditors - 1000 Dr. Cost Ledger control Account - ----1000 Cr. Store Ledger control Account - 1000 Materials Issued to Production: Direct Indirect (production) Dr. Work in progress control account Cr. Store Ledger Control Account Dr. Production Overhead A/c Cr. Store Ledger control Account 5000 5000 500 500

20,000 20,000

- 5000 - 500 --------5500

Ledgers to be maintained: Cost Ledger This is the principal ledger and records nominal accounts and to some extent real accounts. Store Ledger Store accounts for various types of stores are maintained Work in progress ledger Records are being made of each type of ob undertaken, cost incurred therefore, and production during the period. Finished Goods Ledger Contains separate accounts for each type of job/ work completed. Principal Accounts: Cost Ledger Control Account Store Ledger Control Account Work in Progress Control Account Finished Goods Control Account Wages Control and Clearance Account Manufacturing Overhead Account Administrative Overheads Account Selling and Distribution Overhead account Overhead Adjustment Account Cost of Sales Account Costing Profit and loss Account

Return from Shop to Store Transfer from job no 10 to 13


Dr. Store Ledger control Account Cr. Work in progress Control Account Dr. Job no 13 Cr. Job no 10

Tk.300 200
-300 -300 -200 -200

Stores Issued o factory repair order: - Tk. 20


Dr. Production Overhead A/c Cr. Store Ledger control Account -20
-20

II) Labor:
Wages Paid Direct Indirect: Production Administration Selling and Distribution 5000 700 500 300

1500 -------6500 ------6500

i) Dr. Wages clearance A/c Cr. Cost Ledger Control Account

6500

ii) Dr. Work in Progress Control Account Cr. Wages Clearance Account iii) Dr. Production Overhead A/c Dr. Administrative Overhead Account Dr. Selling & Distribution Overhead Account Cr. Wages Clearance Account III) Direct Expenses; Tk. 1000 for job no -23 Dr. Work in Progress Control A/c Cr. Cost Ledger Control A/c IV) Overhead:

5000 5000 700 500 300 1500 1000 1000

a) Petty Expenses: Production Administration Selling & Distribution Dr. Production Overhead A/c Dr. Administration Overhead A/c Dr. Selling & Distribution Overhead A/c Cr. Cost Ledger Control A/c

50 30 20
100 50 30 20 --100

b) Carriage inwards on stores issued for production


Dr. Production Overhead A/c Cr. Cost Ledger control A/c 10

- 10
10

c) Production Overhead recovered


Dr. Work in progress control A/c Cr. Overhead Adjustment A/c -1800

- 1800
-1800