Page 54 - DCOM202_COST_ACCOUNTING_I

Cost Accounting – I

Notes Stock of Semi-finished Goods

The treatment of the stock of semi-finished goods is mainly depending upon the two different
approaches, viz.
1. prime cost basis, and
2. Factory cost basis.
The factory cost basis is considered to be predominant over the early one due to the consideration
of factory overheads at the moment of semi finished goods treatment. The indirect expenses are
the expenses converting the raw materials into semi-finished goods which should be relatively
considered for the treatment of the stock valuation rather than on the basis of prime cost.
Particulars `
prime cost XXXXXX
(+) Factory overheads incurred XXXXXX
(+) Opening work in progress XXXXXX
(–) Closing work in progress XXXXXX
Factory cost XXXXXX

Stock of Finished Goods

The treatment of the stock of finished goods should carried over in between the opening stock
and closing stock and adjusted among them before the finding the cost of goods sold.

Particulars `
Cost of production XXXXX
(+) Opening stock of finished goods XXXXX
(–) Closing stock of finished goods XXXXX
Cost of goods sold XXXXX

Example: The following data has been from the records of Centre corporation for the
period from June 1 to June 30, 2005
2005 2005
1 Jan 31 Jan
st
st
Cost of raw materials 60,000 50,000
Cost of work in progress 24,000 30,000
Cost of finished good 1,20,000 1,10,000
Transaction during the month
purchase of raw materials 9,00,000
Wages paid 4,60,000
Factory overheads 1,84,000
Administration overheads 60,000
Selling overheads 40,000
Sales 18,00,000
Draft the cost sheet.

48 LOVELY PROFESSIONAL UNIVERSITY