Stores ledger control A/c X 2. Direct Labor Dr W.I.P. Control A/c Cr Cash A/c 3. Accrued Direct Wages Dr W.I.P. Control A/c Cr Wages Control A/c Indirect Wages Dr Factory overheads control A/c Cr Wages Control A/c 4. Production Overheads (i) (not yet paid) Dr Factory overhead control A/c Cr Expenses/Creditor control A/c (ii) (When paid) Dr Expense/creditors A/c Cr Cash A/c Note Overheads entries apply when there is an interlocking accounting system. 5. Finished goods transferred to the store: Dr Finished goods stock control A/c Cr W.I.P Control A/c S TRATHMORE U NIVERSITY STUDY PACK
145 Costing Systems 6. Sale delivery of finished goods to customers: (i) On Credit: Dr Debtors control A/c Cr Sales A/c (ii) In Cash: Dr Bank/Cash A/c Cr(Sales A/c 7. Cost of goods sold to customers: Dr Cost of sales A/c Cr Finished goods control A/c 8. (i) When there is over absorption of production overheads: Dr Factory overheads control A/c Cr P & L A/c (ii) When there is under absorption of production overheads: Dr P& L A/c Cr Factory overheads control A/c 9. When there are non-manufacturing overheads: Dr P & L A/c Cr Non-manufacturing overheads control A/c or non-manufacturing overheads/expenses are regarded as period costs & are therefore not changed To W.I.P control A/c. Job Cost Account Dr Cr Direct materials issued from stock X Materials returned to the store X Direct wages X Materials transferred to other jobs X Production overheads absorbed X Cost of completed jobs transferred to finished goods A/c X Materials transferred from other jobs X Balance c/d (Total cost of that job) X XX XX Illustrations: The following transactions were made by Z limited in the month of December. Direct Materials 8,000/= was bought on credit, out of these, materials worth 5,000/= were returned to the suppliers. 50,000/= was issued from the store Indirect materials issued amounted to 5,000/= Direct wages allocated to production amounted to 20,000/= Goods worth 200,000/= were sold Finished goods worth 100,000/= were transferred to the store. The cost of goods sold was 140,000/= Unpaid indirect expenses were 32,000/= Indirect wages allocated amounted to 15,000/= Non-manufacturing overheads incurred amounted to 20,000/= COST ACCOUNTING
Lesson Six 146 Overhead expenses charged to the jobs – 60,000/= Required a) Prepare the stores ledger control A/c b) Factory overhead control A/c c) W.I.P. control A/c d) Costing P & L A/c Stores Ledger Control A/c Creditors (material) 8,000 Creditors control 5,000 W.I.P 50,000 (Indirect materials) Factory overheads 5,000 Factory Overheads Control A/c Stores Ledger (material) 5,000 W.I.P 60,000 Creditors (wages) 32,000 Incurred wages 15,000 P + LA/c Overabsorption 8,000 _____ 60,000 60,000 W.I.P Control A/c Stores Ledger (material) 50,000 Finished goods stock control 100,000 Control (D wages) 20,000 Overhead expenses 60,000 Costing P and L A/c Finished goods control 140,000 Sales 200,000 Non manufacturing Factor overhead 8,000 Overheads 20,000 absorption Costing profit 48,000 6.2 BATCH COSTING This is a type of job costing that is used when production consists of limited repetitive work and definite number of item manufactured in one batch.
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