Page 289 - DCOM202_COST_ACCOUNTING_I

Unit 14: Equivalent Production in Process Costing

Process Account C Notes

Amount Amount
Particulars Particulars
(`) (`)
To process B 7,200 By Closing stock 2,000
To Materials and Direct labour 4,800 By Finished stock a/c 11,500
To Profit (15% on cost or 13 1 3 % on 1,500
transfer price)
13,500 13,500

Example: A product passes through two processes A and B. Output of process A is
passed to Process B at cost plus 25 per cent profit and finished output is similarly transferred to
Finished Stock Account at cost plus 25 per cent profit. There was no partly finished work in either
process on 30 June, on which date the following further information’s was available:
th
process A (`) process B (`)
Materials consumed 2,000 6,000

Direct labour 3,000 4,000
Closing stock (30 June) 1,000 3,000
th
Out of the finished stocks, a portion remained at hand valued at ` 5,000 and the balance was sold
for ` 20,000. Ignoring the question of overheads and assuming there were no opening stocks;
prepare the Process and Finished stock accounts.
Solution:

Process Account A

Amount Amount
Particulars Particulars
(`) (`)
To Materials 2,000 By Transfer to process B a/c 5,000
“ Direct labour 3,000 “ Closing stock 1,000
“ Profit & Loss account (25% on 1,000
` 4,000)
6,000 6,000

Process Account B
Amount
Particulars Amount (`) Particulars
(`)
To Transferred from process A a/c 5,000 By Transfer to Finished stock account 15,000
“ Materials 6,000
“ Direct labour 4,000 “ Closing stock 3,000
“ Profit (25% on ` 12,000) 3,000
18,000 18,000

Finished Stock Account
Amount Amount
Particulars Particulars
(`) (`)
To Transferred from process B a/c 15,000 By Sales 20,000
“ Profit and Loss a/c 10,000 “ Closing stock 5,000
25,000 25,000

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