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Chapter No.04

The Cost Accounting System Design and operation. Chapter No.04. It is the type of book keeping in which double entry transactions are recorded for cost accounting transactions. Following are the major cost accounting transactions: Purchase of materials Issue of materials Incurring labour

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Chapter No.04

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  1. The Cost Accounting System Design and operation Chapter No.04

  2. It is the type of book keeping in which double entry transactions are recorded for cost accounting transactions. • Following are the major cost accounting transactions: • Purchase of materials • Issue of materials • Incurring labour • Incurring factory overhead • Completing goods • Selling goods to customers Cost accounting book keeping

  3. a. Materials 10 500 Accounts Payable 10 500 Purchase of Materials Materials purchased on credit

  4. b. Work in process account9 500 Materials account9 500 Issue of direct materials to production Direct materials issued to production

  5. c. Factory overhead account500 Materials account500 Issue of indirect materials to production Indirect materials issued to production

  6. d. Accounts payable500 Materials account500 Return of materials to suppliers Materials returned to suppliers

  7. e. Payroll account19 500 Accrued payroll19 500 Preparation of Payroll Preparation of payroll

  8. f. Work in process account-direct labour9 500 Factory overhead-indirect labour 2500 Selling overhead-sales salaries 3000 Admin overhead-office salaries 4500 Payroll account19 500 Classification of payroll Payroll Classified

  9. g. Accrued payroll account19 500 Bank account17 500 Income tax Payable 1000 Insurance payable 1000 Payment of payroll Payroll paid

  10. h. Factory overhead account8 500 Account payables7 500 Accumulated Depreciation 1000 Other manufacturing overhead incurred Other factory overhead incurred

  11. i. Selling overhead- 3000 Admin overhead- 4500 Account Payables7 500 Other Selling and Admin expenses incurred Other selling and admin expenses incurred

  12. j. Work in Process Account8 500 Factory overhead account8 500 Factory overhead applied into production Factory overhead charged to production

  13. k. Finished goods account19 500 Work in process account19 500 When goods completed Goods completed and transferred to finished goods

  14. l. Cost goods sold account19 500 Finished goods account19 500 When goods sold Cost of goods sold recorded Account Receivable29 500 Sales account 29 500 Sales value of goods recorded

  15. m. Cash account19 500 Account Receivables19 500 When cash collected from receivables Cash collected from receivables

  16. n. Account Payables19 500 Bank account19 500 When cash paid to payables Cash paid to payables

  17. questions

  18. During May the Endeavor company showed the following transactions: 1. Materials purchased on account for $40,000. 2. Direct materials issued for $65,000. 3. Indirect materials issued for $3,500. 4. Total Payroll • Direct Labour $80,000 • Indirect labour $9,500 5. Materials returned to suppliers for $900. 6. Payroll paid $75,000 7. Sundry manufacturing overhead incurred 42,000. 8. Marketing and administrative expenses incurred $8,500. 9. Account receivable collected $300,000. 10. Accounts payable paid $135,000. 11. Depreciation charged at 2% of cost of $120,000 of a factory building and 10% of cost of 237240 of factory equipment. 12. Factory overhead applied at the rate of 60% of direct labour cost. 13. Goods finished during the month for $203,400. 14. Goods sold costing $205000 and sales value $285000. Required: Record journal entries for above transactions. Exercise no.01

  19. During September the MacFarland company showed the following transactions: 1. Materials purchased on account for $48,500. 2. Direct materials issued for $62,000. 3. Indirect materials issued for $6,000. 4. Total Payroll • Direct Labour $40,000 • Indirect labour $10,000 • Office salaries $15,000 • Sales salaries $20,000 5. Payroll paid after deducting 6.5% income tax and 10% insurance payable. 6. Sundry manufacturing overhead incurred $12,600. 7. Factory overhead applied at the rate of 80% of direct labour cost. 8. Goods finished during the month for $155,000. 9. Goods sold costing $160,000 and sales value $222,000. 10. Cash collected from receivables for $168,000. Required: Record journal entries for above transactions. Exercise no.02

  20. During November The Design company showed the following transactions: 1. Materials purchased on account for $33,000. 2. Direct materials issued for $22,000. 3. Indirect materials issued for $6,500. 4. Total Payroll • Direct Labour $15,000 • Indirect labour $4,000 • Office salaries $3,000 • Sales salaries $8,000 5. Payroll paid after deducting 6.5% income tax and 10% insurance payable. 6. Sundry manufacturing overhead incurred $2000. 7. Factory overhead applied at the rate of 110% of direct labour cost. 8. Goods finished during the month for $48,300. 9. Goods sold costing $45,000 and sales value $65,000. Required: Record journal entries for above transactions. Exercise no.03

  21. During September the Stillwater company showed the following transactions: 1. Materials purchased on account for $120,000. 2. Direct materials issued for $60,000. 3. Indirect materials issued for $15,000. 4. Total Payroll • Direct Labour $45,000 • Indirect labour $9,000 • Sales salaries $15,000 • Office salaries $21,000 5. Materials returned to suppliers for $900. 6. Payroll paid after deducting 10% income tax payable. 7. Indirect materials purchased $26,250. 8. Sundry manufacturing overhead incurred 6,900. 9. Marketing and administrative expenses incurred $8,500. 10. Depreciation charged at 10% of cost of $120,000 of a factory Machinery. 11. Factory overhead applied at the rate of $6 per hour and number of direct labour hours are 6,000. 12. Goods finished during the month for $126,000. 13. Goods sold costing $96,000 and sales value $150,000. Required: Record journal entries for above transactions. Exercise no.04

  22. During January the Spacecraft company showed the following transactions: 1. Materials purchased on account for $55,000. 2. Direct materials issued for $67,000. 3. Indirect materials issued for $10,000. 4. Total Payroll • Direct Labour $26,400 • Indirect labour $6,400 • Sales salaries $2,800 • Office salaries $2,300 5. Materials returned to suppliers for $950. 6. Payroll paid after deducting 15% income tax payable. 7. Sundry manufacturing overhead incurred 32,000. 8. Factory overhead applied at the rate of $5 per hour and number of direct labour hours are 4,400. 9. Goods finished during the month for $97,520. 10. Goods sold costing $114,000 and sales value $142,500. Required: Record journal entries for above transactions. Exercise no.05

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