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Management and Cost Accounting: Colin Drury
Management and Cost Accounting: Colin Drury
AND COST
ACCOUNTING
SIXTH EDITION
COLIN DRURY
Chapter Four:
Accounting entries for a job costing system
Example
1 February : 1000 units purchased at £1 per unit
1 March : 1000 units purchased at £2 per unit
30 March : 1000 units sold at £4 per unit
Example
The following are the transactions of AB Ltd for the month of April.
3. The total of stores requisitions for direct materials issued for the period
was £165 000.
4. The total issues for indirect materials during the period was £10 000.
5. Gross wages of £185 000 were incurred during the period consisting
of:
Wages paid to employees £105 000
PAYE due to Inland Revenue £60 000
National insurance contributions due £20 000
6. All the amounts due in transaction 5 were settled by cash during the
period.
7. The allocation of the g oss wages for the period was as follows:
Direct wages £145 000
Indirect wages £40 000
9. Indirect factory expenses of £41 000 were incurred during the period.
12. Non-manufacturing overhead incurred during the period was £40 000.
13. The cost of jobs completed and transferred to finished goods stock was £300
000.
14. The sales value of goods withdrawn from stock and delivered to customers
was £400 000 for the period.
15. The cost of goods withdrawn from stock and delivered to customers was
£240 000 for the period.
Example
Note the above accounts will be cleared by crediting cash and debiting each of the
accounts.
5. Wages accrued a/c 105 000 7.Work in progress a/c 145 000
5. PAYE tax a/c 60 000 7.Factory overhead a/c 40 000
5. National Insurance
a/c 20 000
185 000 185 000
BACKFLUSH COSTING
Illustration
Purchase of raw materials £1 515 000
Conversion costs £1 010 000
Finished goods manufactured 100 000 units
Sales for the period 98 000 units
No opening stocks
Standard unit cost is £25 (£15 materials and £10 conversion cost)
Zero material variances
BACKFLUSH COSTING
Method 2
1. Only one trigger point =Manufacture of finished product
CONTRACT COSTING
1. Contract costing is applied to relatively large cost units which take a long time
to complete (e.g.civil engineering projects).
CONTRACT COSTING
BALANCE-SHEET ENTRIES