GAUHATI UNIVERSITY BCOM 4TH SEM. (HONOURS/REGULAR)
Cost Accounting Solved Paper'2022
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Cost Accounting
2022
COMMERCE
(Honours/Regular)
Paper: COM-HC-4016/COM-RC-4026
(Cost Accounting)
Full Marks: 80
Time: hours.
The figures in the margin indicate full marks for the questions.
Answer either in English or in Assamese.
1.Answer the following as directed: (any ten) 1x10=10
নিৰ্দেশ অনুসৰি তলত দিয়াবোৰৰ পৰা দহটাৰ উত্তৰ লিখা :
(a) Costing is a technique of _______cost.
(Fill in the blank with appropriate word)
Ans: Costing is a technique of Ascertaining cost.
(b) Cost accounting is based on ________figures.
(Fill in the blank with appropriate word)
Ans: Cost accounting is based on estimated figures
(c) Variable cost per unit remains constant.
(State whether the statement is true or false)
Ans: The Statement Is True
(d) Wages paid to factory supervisors are overhead.
(State whether the statement is true or false)
Ans: The Statement Is True
(e) Re-ordering level = Minimum consumption Minimum re-order period. (State whether the statement is true or false)
Ans:
(f) Which methods of valuing materials is suitable in terms of rising prices ?
LIFO
FIFO
HIFO
FILO
Ans: 2.FIFO, In terms of rising prices, the FIFO (first-in, first-out) method of valuing materials is generally considered the most suitable.
(g) In which industry process costing is not used?
(i)Chemical
(ii) Textiles
(iii) Cement
(iv) Oil refinery
Ans: (ii) Textiles
(h) An abnormal loss is
(i) due to the nature of process
(ii) due to the abnormal factors
(iii) None of the above two
Ans: (ii) Due to the abnormal factors
(i) Costing provides all of the following information, except_____.
(Fill in the blank from the following options)
(i)product costs
(ii) cash forecasts
(iii) inventory value
(iv) cost of goods sold.
Ans: (ii) cash forecasts
(j) Define the term 'costing'.
Ans: Costing refers to the process of determining the cost of production of goods or services.
(k) What is idle time?
Ans: Idle time refers to the time during which employees are not working but are still being paid.
(l) What is meant by cost-plus contract?
Ans:Cost-plus contract is a type of contract in which the buyer agrees to pay the seller a specified amount above the actual cost of production.
(m) Write the meaning of 'imputed cost' in Cost Accounting.
Ans:Imputed cost is a cost that is not actually incurred but is included in the cost of production for the purpose of decision making.
(n) What is meant by Cost Ledger Accounting ?
Ans: Cost Ledger Accounting is a system of accounting that is used to maintain records of the costs of production for each product or service. It involves creating a separate account for each cost element and tracking the costs of materials, labor, and overheads for each product or service.
(O) Identify the types of Specific Order
Costing :
(i) Batch costing
(ii) Job costing
(iii) Process costing
(iv) Both (i) and (ii)
Ans: (iv) Both (i) and (ii)
2.Answer the following questions : (any five) 2x5= 10
(a) Write any two distinguishing features of cost unit and cost centre.
Ans: Two distinguishing features of cost unit and cost centre are:
1.Cost Unit: It is the unit of measurement used to determine the cost of a product or service, such as per unit or per hour. It is used to allocate direct and indirect costs to products or services.
2.Cost Centre: It is a department or functional area of a business for which costs can be identified and allocated. It is used to determine the costs of the activities carried out within the business and to monitor the performance of each department or functional area.
(b) What is economic order quantity ?
Ans:Economic order quantity (EOQ) is the optimal quantity of inventory that a business should order or produce at one time to minimize the total cost of holding and ordering inventory. It takes into account factors such as ordering costs, carrying costs, and demand for the product or service.
(c) State the meaning of overtime.
Ans: Overtime refers to the additional time worked by employees beyond their normal working hours. This can be voluntary or mandatory and is often paid at a higher rate than regular hours.
(d) State two features of indirect labor.
Ans: Two features of indirect labour are:
1.Indirect labour refers to the cost of the employees who do not directly produce or sell the product or service but support the production process, such as maintenance workers, supervisors, or quality control inspectors.
2.Indirect labour costs are included in overhead costs and are allocated to products or services based on predetermined rates or cost drivers.
(e) State two important features of contract costing.
Ans: Two important features of contract costing are:
1.It is used to determine the cost of production for a specific contract or project.
2.The cost of production is attributed to the contract or project, rather than to the product or service itself.
(f)What is meant by 'minimum level' in stock control ?
Ans: Minimum level in stock control refers to the minimum quantity of inventory that a business must maintain to ensure that there is no stockout situation. It is a safety stock that protects against unexpected increases in demand or delays in replenishment.
(g) What is machine hour rate ?
Ans:Machine hour rate is the cost of operating and maintaining a machine per hour of use. It includes costs such as depreciation, repairs, maintenance, and energy consumption, and is used to allocate these costs to products or services that use the machine.
(h) What is meant by absorption of overheads?
Ans: Absorption of overheads refers to the process of allocating indirect costs to products or services. It involves applying predetermined overhead rates or cost drivers to determine the indirect costs associated with each product or service. The goal is to accurately determine the cost of production for each product or service and to ensure that all costs are properly allocated.
3.Answer any four of the following questions: 5×4=20
(a) Write five differences between Financial Accounting and Cost Accounting.
Ans: The following are the differences between financial accounting and cost accounting:
1.Purpose: Financial accounting is primarily concerned with recording and reporting financial transactions and preparing financial statements for external stakeholders such as investors, creditors, and regulatory authorities. Cost accounting, on the other hand, focuses on determining and analyzing the cost of producing goods or services within an organization.
2.Audience: Financial accounting reports are intended for external stakeholders such as investors, creditors, and regulators. Cost accounting reports are intended for internal stakeholders such as managers and decision-makers within the organization.
3.Timeframe: Financial accounting generally focuses on historical financial information, with financial statements reflecting the financial performance of a company over a specific period, such as a quarter or a year. Cost accounting is forward-looking and helps managers make decisions about the future by providing them with information about the cost of producing goods or services.
4.Scope: Financial accounting covers all financial transactions and events that occur within an organization, including revenue, expenses, assets, liabilities, and equity. Cost accounting focuses only on the costs incurred in producing goods or services and ignores other financial transactions.
5.Reporting Frequency: Financial accounting reports are typically produced on a quarterly or annual basis, while cost accounting reports are produced more frequently, often on a weekly or monthly basis, to provide managers with up-to-date information for decision-making.
(b) Write a short note on ABC analysis of inventory control.
Ans: ABC analysis is a method used in inventory control to classify items based on their relative importance. The method categorizes inventory items into three groups based on their value, with A items being the most important, followed by B and C items.
A items are high-value items that make up a relatively small percentage of the inventory but account for a large proportion of the total value. These items require close attention and control, as any stockouts or delays in replenishment can have a significant impact on the business.
B items are moderately important items that make up a moderate percentage of the inventory value. These items require moderate attention and control.
C items are low-value items that make up a large percentage of the inventory but account for a small proportion of the total value. These items require minimal attention and control.
ABC analysis helps businesses prioritize their inventory management efforts, focusing more resources on the items that are most important to the business. For example, A items may be monitored more closely and have tighter inventory control policies, while C items may be managed more passively with less attention to detail.
Overall, ABC analysis can help businesses optimize their inventory levels, reduce stockouts, and improve their overall inventory management efficiency.
(c) Black and White manufacture and sell 'Dirt Buster'. Following details are available for the year ending on 31/03/2022:
Factory expenses at 25% of prime cost
Administrative expenses at 20% of factory cost
Selling and distribution expenses at ₹ 300 per unit
Opening stock of finished goods (100 units) at ₹ 2,53,750 and closing stock of finished goods 80 units. Number of Dirt Busters sold during the period 1,220 unit at ₹ 4,000 per unit.
Prepare Cost Statement showing cost of production per unit and profit.
Gauhati University Cost Accounting Solved Paper'2022
(d)Following information relating to a type of raw material is available:
Calculate EOQ and Total Inventory Cost in respect of the particular material. 3+2=5
Solution: We can use the EOQ (Economic Order Quantity) formula to calculate the optimal order quantity:
EOQ = √[(2 x annual demand x ordering cost per order) / (storage cost per unit x interest rate)]
EOQ = √[(2 x 4,800 x 8) / (0.02 x 4.80 x 0.1)]
EOQ = √(61,440)
EOQ = 248.3 units (rounded to nearest whole number)
Therefore, the optimal order quantity is 248 units.
To calculate the total inventory cost, we need to consider the cost of ordering and holding the inventory. The total inventory cost formula is:
Total Inventory Cost = (ordering cost x annual demand) / EOQ + (storage cost per unit x EOQ / 2)
Total Inventory Cost = (8 x 4,800) / 248 + (0.024 x 248 / 2)
Total Inventory Cost = 153.22
Therefore, the total inventory cost for the material is ₹153.22.
(e) How is the profit of an incomplete contract ascertained ? Explain.
Ans: The profit of an incomplete contract is typically ascertained by estimating the expected future revenues and costs associated with completing the contract. This estimation involves forecasting the likely outcome of the contract based on available information and making assumptions about future events and circumstances.
To estimate future revenues, the contractor must consider the expected price of the goods or services to be delivered under the contract and the quantity or scope of work that remains to be completed. In some cases, the contractor may have to negotiate with the customer to adjust the contract price or scope of work if there are changes to the original agreement.
To estimate future costs, the contractor must consider the expenses that will be incurred to complete the work remaining under the contract, such as labor, materials, and overhead costs. The contractor must also consider any potential risks or uncertainties that could impact the cost of completing the contract, such as delays, changes in regulations or market conditions, or unforeseen events.
Once the contractor has estimated the future revenues and costs associated with completing the contract, they can determine the expected profit or loss on the contract. This information can be used to assess the financial performance of the project and make decisions about how to proceed with completing the work. In some cases, the contractor may decide to renegotiate the terms of the contract, seek additional funding or resources, or terminate the contract if the expected profit is not sufficient to justify completing the work.
(f) Explain the needs for reconciliation of cost and financial accounts.
Ans: The reconciliation of cost and financial accounts is important for several reasons:
1.Accuracy of financial statements: The financial statements of an organization, including the income statement and balance sheet, must accurately reflect the financial position of the company. Reconciliation ensures that the costs reported in the cost accounting system are consistent with the financial transactions recorded in the financial accounting system. This helps to ensure that the financial statements are accurate and reliable.
2.Compliance with accounting standards: Accounting standards require that costs are properly allocated to the products or services being produced. Reconciliation helps to ensure that costs are allocated correctly and in accordance with generally accepted accounting principles (GAAP) or international financial reporting standards (IFRS).
3.Cost control: Reconciliation helps to identify discrepancies between the cost accounting system and financial accounting system. This allows managers to investigate and correct any errors or discrepancies, which can help to control costs and improve profitability.
4.Better decision-making: Accurate and timely cost information is important for making informed business decisions. Reconciliation of cost and financial accounts provides management with a clearer picture of the true costs of production, which can help to guide decisions on pricing, product mix, and resource allocation.
5.Facilitation of audits: Reconciliation helps to facilitate internal and external audits by providing auditors with accurate and consistent financial information. This can help to streamline the audit process and reduce the likelihood of audit findings or errors.
Overall, the reconciliation of cost and financial accounts is essential for ensuring accurate financial reporting, complying with accounting standards, controlling costs, making informed decisions, and facilitating audits.
(g) Explain the concept of perpetual inventory system as a technique of effective material control.
Ans: A perpetual inventory system is a technique of effective material control that involves maintaining a continuous and real-time record of inventory levels. Under this system, each time a material is received or issued, the inventory record is immediately updated to reflect the new balance.
The perpetual inventory system provides several benefits for effective material control:
1.Real-time inventory tracking: The perpetual inventory system provides real-time visibility into inventory levels, enabling organizations to quickly identify shortages or surpluses and adjust production or ordering accordingly.
2.Reduced inventory holding costs: By maintaining an accurate record of inventory levels, organizations can avoid overstocking and reduce inventory holding costs. This can result in cost savings and improved profitability.
3.Improved accuracy: The perpetual inventory system reduces the risk of errors in inventory tracking by eliminating the need for manual record-keeping and reducing the likelihood of data entry errors.
4.Better decision-making: Accurate and up-to-date inventory information allows organizations to make informed decisions about ordering, production, and sales. This can lead to improved efficiency and profitability.
5.Facilitation of JIT: The perpetual inventory system is a critical component of just-in-time (JIT) inventory management. By providing real-time inventory information, JIT systems can minimize inventory levels and reduce waste, resulting in cost savings and improved efficiency.
Overall, the perpetual inventory system is an effective technique of material control that provides real-time visibility into inventory levels, reduces holding costs, improves accuracy, enables better decision-making, and facilitates JIT inventory management.
(h) Mention five special features of a good costing system.
Ans:
4. Answer any four of the following questions: 10×4=4
(a) What is cost accounting? Explain the objectives of cost accounting. 3+7=10
Ans: Cost accounting is a branch of accounting that deals with the collection, analysis, and interpretation of cost data to help management make informed decisions. It involves tracking and reporting of all costs related to a business operation, including direct costs, indirect costs, and overhead costs.
Objectives of cost accounting:
1.Ascertainment of cost: The primary objective of cost accounting is to ascertain the cost of production of goods or services accurately. This helps management in decision-making related to pricing, production, and inventory management.
2.Cost control: Cost accounting helps in controlling and reducing costs by identifying areas where cost can be minimized, such as reducing wastage, improving efficiency, or changing suppliers.
3.Profitability analysis: Cost accounting helps management analyze the profitability of a product or service by calculating its cost and comparing it to the revenue generated.
4.Budgeting and forecasting: Cost accounting provides data for budgeting and forecasting, which helps management plan for the future and make informed decisions.
5.Performance evaluation: Cost accounting provides a basis for evaluating the performance of different departments, products, or processes. It helps in identifying areas of improvement and making informed decisions to improve overall performance.
Overall, the objectives of cost accounting are to provide management with accurate and relevant cost information to help them make informed decisions related to production, pricing, inventory management, and overall business strategy.
(b) Bishal is employed in a factory. From the following information, calculate his earning per day under
(i) straight piece rate; and
(i) Taylor's differential piece rate system. Normal rate per hour 90.00. Standard time per unit is 60 seconds.
Differentials:
80% of piece rate below standard
120% of the piece rate above standard Production achieved: 500 units per day.
Solution:
Given information:
Normal rate per hour = Rs. 90.00
Standard time per unit = 60 seconds
Differentials:
80% of piece rate below standard
120% of the piece rate above standard
Production achieved = 500 units per day
(i) Calculation of earning per day under straight piece rate system:
Let the piece rate be 'x'
Standard time taken for one unit = 60 seconds = 1 minute
So, the standard time taken for 500 units = 500 x 1 minute = 500 minutes
Earning under straight piece rate = Number of units produced x Piece rate
Therefore, x = Normal rate per hour / Standard time per unit = 90 / (60/60) = 90
Earning under straight piece rate = 500 x 90 = Rs. 45,000 per day
(ii) Calculation of earning per day under Taylor's differential piece rate system:
Let the standard output be 400 units per day
Output achieved = 500 units per day
Time taken to produce 500 units = 500 x 60 seconds = 30,000 seconds
Time allowed for 500 units = 400 x 60 seconds = 24,000 seconds
Time taken for 400 units (standard output) = 400 x 60 seconds = 24,000 seconds
Time taken for additional 100 units (above standard output) = 6,000 seconds
Therefore, time taken per unit for additional 100 units = 6,000 / 100 = 60 seconds
Piece rate for 400 units (standard output) = Normal rate per hour / (Standard time per unit x 80%) = 90 / (60/60 x 0.8) = Rs. 112.50 per unit
Piece rate for additional 100 units (above standard output) = Piece rate for 400 units x 120% = Rs. 135 per unit
Earnings under Taylor's differential piece rate system = (Number of units produced at standard rate x Piece rate for standard output) + (Number of units produced above standard rate x Piece rate for additional output)
= (400 x 112.50) + (100 x 135) = Rs. 51,000
Therefore, Bishal's earning per day under Taylor's differential piece rate system is Rs. 51,000.
(c) Briefly describe two remuneration plans together with their advantages and disadvantages. 5+5=10
Ans: Two common remuneration plans are:
1.Time-based pay: This plan compensates employees based on the time they spend at work. The employee is paid for each hour, day or week they work.
Advantages:
Simple to administer.
Predictable for both the employer and employee.
Encourages employees to show up to work on time and consistently.
Disadvantages:
Does not incentivize productivity or efficiency.
May not accurately reflect the value or performance of the employee.
Does not encourage employees to take ownership of their work.
2.Performance-based pay: This plan compensates employees based on their individual or team performance. The employee is paid based on the output or quality of their work, such as sales made or products produced.
Advantages:
Encourages productivity and efficiency.
Rewards employees for their hard work and achievements.
Provides a clear link between pay and performance.
Disadvantages:
May create competition or tension among employees.
May be difficult to measure performance accurately.
May not account for external factors that affect performance, such as market conditions.
(d) A product passes through two processes.
The details are as below:
Prepare process 1 and process 2 account also ascertain cost per unit.
Solution: The solution for the above question will be uploaded on YouTube make sure you subscribed our channel.
(e) What is material control ? Explain the purchase procedure to be maintained under material control system. 2+8=10
Ans: Material control refers to the process of managing the flow of materials into and out of a company. The main objective of material control is to ensure that materials are available when they are needed and are used efficiently. Effective material control can help reduce waste, lower costs, and improve productivity.
The purchase procedure to be maintained under a material control system includes the following steps:
1.Determination of requirements: The first step in the purchase procedure is to determine the requirements of materials based on the production plan and inventory levels. This involves forecasting future demand and estimating the quantity and quality of materials required.
2.Requisition: Once the material requirements are determined, a requisition is prepared, which specifies the quantity and quality of materials required. The requisition is then sent to the purchasing department.
3.Selection of suppliers: The purchasing department selects potential suppliers based on factors such as price, quality, delivery time, and reliability. A list of approved suppliers is maintained for each type of material.
4.Inquiry and quotation: The purchasing department sends inquiries to the selected suppliers requesting quotations for the required materials. The suppliers provide their quotations based on the specifications provided.
5.Comparison of quotations: The purchasing department compares the quotations received from the suppliers and selects the most suitable supplier based on factors such as price, quality, delivery time, and reliability.
6.Purchase order: Once the supplier is selected, a purchase order is prepared, which specifies the quantity and quality of materials, price, delivery time, and payment terms. The purchase order is sent to the supplier, who then acknowledges receipt of the order.
7.Receipt of materials: When the materials are received, they are inspected to ensure that they meet the specified quality and quantity requirements. Any discrepancies are noted and resolved with the supplier.
8.Storage and issue: The materials are then stored in the appropriate location and issued to the production department as per the production plan.
In brief, an effective material control system involves careful planning, selection of reliable suppliers, and proper purchase procedures to ensure that materials are available when they are needed and are used efficiently.
(f) What is labor turnover ? What are various causes of labour turnover ? Explain in brief. 3+7=10
Ans: Labor turnover is the rate at which employees leave a company or organization and are replaced by new employees. It is expressed as a percentage of the total number of employees in a particular time period. Labor turnover is an important measure of workforce stability and the effectiveness of a company's human resource management policies.
There are various causes of labor turnover, some of which are as follows:
1.Low salary or benefits: If employees feel that they are not being paid fairly or that their benefits are inadequate, they may look for employment elsewhere.
2.Lack of job security: If employees do not feel secure in their jobs, they may leave in search of more stable employment.
3.Poor working conditions: If the working conditions are uncomfortable or hazardous, employees may leave to find a safer and more comfortable work environment.
4.Lack of career growth: If employees feel that there are no opportunities for career growth or development, they may look for opportunities elsewhere.
5.Poor management: If employees feel that they are not being treated fairly or that the management is not supportive, they may leave in search of a better work environment.
6.Personal reasons: Employees may leave due to personal reasons, such as relocating, family obligations, or health issues.
In brief, labor turnover can have negative consequences for a company, including reduced productivity, increased costs associated with recruiting and training new employees, and decreased employee morale. Therefore, it is important for companies to understand the causes of labor turnover and take steps to reduce it, such as improving working conditions, offering competitive salaries and benefits, providing opportunities for career growth and development, and ensuring effective management practices.
(g) Discuss various bases for apportionment of overheads to cost centers.
Ans: Overhead costs are indirect costs that cannot be easily traced to specific products or services. Therefore, it is important to allocate overhead costs to cost centers that generate the overhead costs. There are several methods or bases for apportionment of overheads to cost centers. Some of the commonly used bases for apportionment of overheads to cost centers are as follows:
1.Direct labor cost: Overhead costs are allocated based on the amount of direct labor cost incurred in each cost center. This method is suitable when the amount of direct labor is a significant factor in the production process.
2.Direct machine hours: Overhead costs are allocated based on the amount of direct machine hours used in each cost center. This method is suitable when the production process is heavily reliant on machinery.
3.Direct material cost: Overhead costs are allocated based on the amount of direct material cost incurred in each cost center. This method is suitable when the amount of direct material is a significant factor in the production process.
4.Number of employees: Overhead costs are allocated based on the number of employees in each cost center. This method is suitable when the production process is labor-intensive.
5.Floor space occupied: Overhead costs are allocated based on the amount of floor space occupied by each cost center. This method is suitable when the overhead costs are related to the use of space, such as rent, utilities, or property taxes.
6.Activity level: Overhead costs are allocated based on the level of activity in each cost center. This method is suitable when the overhead costs are related to the level of activity, such as maintenance, repairs, or quality control.
7.Units produced: Overhead costs are allocated based on the number of units produced in each cost center. This method is suitable when the production process is highly automated and the overhead costs are directly related to the production volume.
The choice of the appropriate method for apportionment of overheads to cost centers depends on the nature of the business and the production process. Companies can use a combination of these methods to ensure a fair and accurate allocation of overhead costs to cost centers.
(h) What is job costing? What are the source documents used in job costing? Explain the procedure of job costing. 3+7=10
Ans: Job costing is a method of cost accounting used to determine the cost of producing a specific product or providing a specific service. Job costing is used when the production process is based on specific jobs, projects, or contracts that are unique and have varying requirements. Job costing allows companies to track the cost of each job or project and determine the profitability of each project.
The source documents used in job costing include job orders, time sheets, and material requisitions. Job orders are documents that provide details about the job or project, such as the customer's name, the job description, and the estimated cost. Time sheets are used to record the amount of time spent on each job by each employee. Material requisitions are used to record the materials used in each job.
The procedure for job costing involves the following steps:
1.Identify the job: Identify the specific job or project for which costs will be determined.
2.Accumulate direct materials: Collect information about the direct materials used in the job, including the quantity and cost.
3.Accumulate direct labor: Collect information about the direct labor used in the job, including the hours worked and the labor cost.
4.Accumulate manufacturing overhead: Collect information about the manufacturing overhead costs that are directly related to the job, such as equipment depreciation or rent expense.
5.Calculate the total cost: Calculate the total cost of the job by adding the direct materials, direct labor, and manufacturing overhead costs.
6.Determine the unit cost: Determine the unit cost of the job by dividing the total cost by the number of units produced.
7.Compare to the sales price: Compare the unit cost to the sales price to determine the profitability of the job.
By following these steps, companies can determine the cost of each job or project, track their profitability, and make informed decisions about pricing, production, and resource allocation.
(i) What is abnormal loss? State the causes of abnormal loss. Also explain the procedure of calculating abnormal loss in process costing. 2+2+6=10
Ans: Abnormal loss refers to a loss of materials that is not typical or expected in the production process. It can be caused by various factors such as equipment failure, operator error, natural disasters, theft, or other unforeseen circumstances. Abnormal loss is an unplanned loss that differs from normal loss, which is a loss that is expected in the production process.
The causes of abnormal loss in the production process may include the following:
1.Equipment failure: When the production equipment fails, it can lead to the loss of materials.
2.Operator error: The mistake made by the production operator can lead to the loss of materials.
3.Natural disasters: Natural disasters such as floods, earthquakes, or fire can cause the loss of materials.
4.Theft: The loss of materials can also occur due to theft or pilferage.
The procedure for calculating abnormal loss in process costing involves the following steps:
1.Calculate the expected output: Calculate the expected output of the process by subtracting the normal loss from the total input.
2.Calculate the actual output: Calculate the actual output of the process by subtracting the abnormal loss from the expected output.
3.Determine the loss: Determine the loss by subtracting the actual output from the expected output.
4.Calculate the cost of abnormal loss: Calculate the cost of abnormal loss by multiplying the loss by the cost per unit.
For example, if a process has an expected output of 100 units, and there is an abnormal loss of 10 units, then the actual output would be 90 units. If the cost per unit is $10, then the cost of abnormal loss would be $100 (10 units x $10 per unit).
(i)The following are the summary of transactions obtained from the costing records of Champa Company.
You are required to journalise the above transactions under integral accounting system. 1×10=10
Ans: The journal entries for the given transactions under integral accounting system are as follows:
1.Direct wages A/C Dr. 30,000
To Cash A/C 30,000
2.Indirect wages A/C Dr. 20,000
To Cash A/C 20,000
3.Purchases A/C Dr. 60,000
To Cash A/C 20,000
To Creditors A/C 40,000
4.Production A/C Dr. 200,000
To Stores A/C 200,000
5.Works expenses A/C Dr. 110,000
To Cash A/C 40,000
To Production A/C 70,000
6.Administrative expenses A/C Dr. 84,000
To Cash A/C 50,000
To Production A/C 34,000
7.Finished goods A/C Dr. 400,000
To Production A/C 400,000
Note: In an integral accounting system, all the costs, whether direct or indirect, are charged to the production process. The cost of production is then transferred to finished goods and then to the cost of sales.
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