Page 252 - DCOM202_COST_ACCOUNTING_I

Cost Accounting – I

Notes in closing inventory and to obtain the net realized profit for a period, three columns have to be
shown in the ledger for showing the cost, unrealized profit and the transfer price.

Example: A product passes through three distinct processes to completion. These
processes are numbered A, B and C respectively. During the week ended January 2008, 500 items
were produced. The following information is obtained:
process A (`) process B (`) process C (`)
Materials 3,000 1,500 1,000
Labour 2,500 2,000 2,500

Direct expenses 500 100 500
The indirect expenses for the period were ` 1,400 apportioned to the process on the basis of
wages. You are required to prepare process accounts.

Solution:
Process Account A

Particulars Amount (`) Particulars Amount (`)
To Materials 3,000 By Output transferred to process 6,500
“ Labour 2,500 B Account
“ Direct expense 500
“ Indirect expenses 500
6,500 6,500
Process Account B

Particulars Amount (`) Particulars Amount (`)
To process A a/c 6,500 By Output transferred to process 10,500
“ Materials 1,500 C Account
“ Labour 2,000
“ Direct expense 100
“ Indirect expenses 400
10,500 10,500

Process Account C

Particulars Amount (`) Particulars Amount (`)
To process B a/c 10,500 By Output transferred to Finished 15,000
“ Materials 1,000 Stock Account
“ Labour 2,500
“ Direct expense 500
“ Indirect expenses 500
15,000 15,000

Example: An article passes through three processes of manufacture. During the
week ended 15th March 2005, 600 bottles are produced. The cost books show the following
information:

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