Cost Accounting Cycle

Cost Concepts

Cost Cycle

Cost Accounting Cycle When Wh en Sin Singl glee Gene Genera rall Ledg Ledger er Journal Entries

When Wh en Sep Separ arat atee Gene Genera rall Ledg Ledger er and and Fac Facto tory ry Led Ledge gerr are are Maintain Head Office Books Factory Office Books No.1 ACQUISIUION AND USE OF MARERIALS MARERIALS

Purchase of material from supplier (Direct or indirect material) Material control Factory ledger  Materials control Voucher payable Vouchers payable General ledger 

Return to materials to suppliers Vouchers payable Vouchers payable Material control Factory ledger 

General ledger  Material control

Use of materials in production/material requisitioned/material issued from store Work in process control Marketing overhead control Work in process control Factory overhead control Factory ledger  Factory overhead control Marketing overhead control General ledger  Material control Material control

Return of unused materials from factory Materials control Work in process control  No entry entry Factory overhead control

Materials control Work in process control Factory overhead control

When material is purchased from supplier and immediately sent to production for use Work in process Factory ledger  Work in process Factory overhead control Voucher payable Factory overhead control Voucher payable General ledger 

When there is normal loss of material/shortage of material Factory overhead control Material control No Entry

Composed by: Baber Mehmood

Factory overhead control Material control

Cost Concepts

Cost Cycle No.2 USE OF LABOUR 

Recording gross payroll, deductions and net pay Payroll Payroll Income tax withheld Income tax withheld Provident fund payable Provident fund payable Any other deduction Any other deduction Accrued payroll Accrued payroll

 No Entry

Preparing payroll voucher and payment Accrued payroll Accrued payroll Vouchers payable Vouchers payable

 No entry

Payment of voucher Vouchers payable Cash

 No entry

Distribution of payroll Work in process control Factory overhead control Selling overhead control Admn. overhead control Payroll control

Vouchers payable Cash

Factory ledger  Marketing overhead control Admn. Overhead control Payroll control

Work in process control Factory overhead control General ledger 

Recording employer’s liability for contribution

Factory overhead control Selling overhead control Admn. Overhead control Provident fund payable Social security payable

Factory ledger  Marketing overhead control Admn. Overhead control Provident fund payable Social security payable

Factory overhead control General ledger 

No.3 INSURANCE AND CHARGE OF FACTORY OVERHEAD Recording actual factory overhead Factory overhead actual Factory overhead actual Utilities payable Utilities payable Prepaid insurance Prepaid insurance Allowance for dep. Allowance for dep. OR  OR  Voucher payable Voucher payable Charged of FOH applied to production Work in process Factory overhead applied

Composed by: Baber Mehmood

 No entry

Factory overhead control General ledger 

Work in process FOH applied

Cost Concepts

Cost Cycle

Close FOH applied to FOH control

FOH applied FOH control

A/c

 No entry

To record FOH Under-applied Cost of goods sold Under applied FOH

FOH applied FOH control

General ledger  Under applied FOH

OR 

OR 

WIP-Material WIP-Labour  WIP-FOH Finished goods Cost of goods sold Under applied FOH

Cost of goods sold Factory ledger 

To close under applied FOH to FOH control a/c Under applied FOH  No entry FOH control

WIP-Material WIP-Labour  WIP-FOH Finished goods General ledger  Under applied FOH

Under applied FOH FOH control

No.4 TRANSFER OF COST TO FINISHED GOODS When one WIP a/c is issued Finished goods control Work in process

 No entry

When three WIP a/c are used Finished goods control WIP-Material WIP-Labour  WIP-FOH

Finished goods control Work in process

 No entry

No. 5 SALE OF FINISHED GOODS To record cost of goods sold

Cost of goods sold control Finished goods control

Cost of goods sold control Factory ledger 

General ledger  Finished goods control

To Record Return of Goods at Cost

Finished goods control Cost of goods sold control

Factory ledger  Cost of goods sold control

Composed by: Baber Mehmood

Finished goods control General ledger 

Cost Concepts To Record Sale Price Cash Account receivable Sale control

Cost Cycle

Cash Account receivable Sale control

 No entry

To Record Sale Return

Sale return Accounts receivable

Sale return Accounts receivable

Composed by: Baber Mehmood

 No entry