COST ACCOUNTING Meaning

Cost accounting is concerned with recording, classifying and summarizing costs for determination of costs of products or services, planning, controlling and reducing such costs and furnishing of information to management for decision making. Cost accounting provides various information to management for all sorts of decisions. It serves multiple purposes on account of which it is generally indistinguishable from management accounting or so-called internal accounting. cost accounting is the process of accounting for costs from the point at which its expenditure is incurred or committed to the establishment of the ultimate relationship with cost units. In its widest sense, it embraces the preparation of statistical data, the application of cost control methods and the ascertainment of the profitability of the activities carried out or planned.

Objectives of Cost Accounting

a. Determining Selling Price b. Determining and Controlling Efficiency c. Facilitating Preparation of Financial and Other Statements d. Providing Basis for Operating Policy

Elements of Cost
Direct Cost

a) Direct Material Cost b) Direct Labour Cost c) Direct expenses cost Indirect Cost a)Overheads

Methods of Costing
i. Job Costing: - The system of job costing is used where production is not highly repetitive and in addition consists of distinct jobs so that the material and labor costs can be identified by order number. ii. Contract Costing: - Contract costing does not in principle differ from job costing. A contract is a big job whereas a job is a small contract. iii. Cost Plus Costing: - In contracts where in addition to cost, an agreed sum or percentage to cover overheads and fit is paid to a contractor, the system is termed as cost plus costing. iv. Batch Costing: - This method is employed where orders or jobs are arranged in different batches after taking into account the convenience of producing articles.. v. Process Costing: - If a product passes through different stages, each distinct and well defined, it is desired to know the cost of production at each stage. vi. Operation Costing: - Operation costing is a further refinement of process costing.The industry in which mass or repetitive production is carried out. The industry in which articles have to be stocked in semi-finished stage to facilitate the execution of special orders, or for the convenience of issue for later operations

vii.

Unit Costing: - In this method, cost per unit of output or production is ascertained and the amount of each element constituting such cost is determined.

viii.

Operating Costing:- This system is employed where expenses are incurred for provision of services such as those tendered by bus companies, electricity companies, or railway companies

ix.

Departmental Costing: - The ascertainment of the cost of output of each department separately is the objective of departmental costing.

x.

Multiple Costing:- Under this system, the costs of different sections of production are combined after finding out the cost of each and every part manufactured

INTRODUCTION OF PROCESS COSTING Process costing is a form of operations costing which is used where standardized homogeneous goods are produced. This costing method is used in industries like chemicals, textiles, steel, rubber, sugar, shoes, petrol etc. Process costing is also used in the assembly type of industries also. It is assumed in process costing that the average cost presents the cost per unit. Cost of production during a particular period is divided by the number of units produced during that period to arrive at the cost per unit. Process costing is appropriate for companies that produce a continuous mass of like units through series of operations or process. Also, when one order does not affect the production process and a standardization of the process and product exists. However, if there are significant differences among the costs of various products, a process costing system would not provide adequate product-cost information. Costing is generally used in such industries such as petroleum, coal mining, chemicals, textiles, paper, plastic, glass, and food.

MEANING PROCESS A Process means a distinct manufacturing operation or stage. In process Industries, the raw material goes through a number of processes in a sequence before the finished product is finally produced. For example, production of coconut oil involves the following distinct processes:-1)copra crushing 2)refining and 3)finishing. PROCESS COSTING: Process costing is a method of costing is used to find out the cost of the product in each process. According to CIMA, London-it is that form of operation costing where standardized goods are produced. PROCESS COST:According to CAS-1, when the production processes is such that goods are produced from a sequence of continuous or repetitive operations or processes, the cost incurred during period is considered as process cost.

FEATURES OF PROCESS COSTING

i. ii. iii.

The output consists of products which are homogenous. Production is carried on in different stages having a continuous flow. The input will pass through two or more processes before it takes the shape of the output.

iv.

The output of each process becomes the input for the next process until the final product is obtained, with the last process giving the final product.

v.

If there is a stock of semi-finished goods, it is expressed equivalent units

in terms of

vi.

The total cost of each process is divided by the normal output of that process to find out cost per unit of that process.

vii.

The output of a process is transferred to the next process generally at cost to the process. It may also be transferred at market price to enable checking efficiency of operations in comparison to the market conditions.

viii.

Normal and abnormal losses may arise in the processes

ADVANTAGES OF PROCESS COSTING i. Process can be collected and determined for even a short period like a day, a week or a month. ii. Process costing is much simple, easy and less expensive method of costing as compared to other methods. iii. Being a simple system to establish and operate, Process Costing facilitates greater control of the management over costs, wastage etc. iv. Since the processes and product are standard, it is easy to make decision regarding pricing, quotation ,tenders etc. DISADVANTAGES OF PROCESS COSTING i. ii. It does not give a detailed analysis of the costs. Process costing gives only historical costs which are not useful for forecast of future trends etc. iii. Process costing is based on average cost method, which is not thatsuitable for performance analysis, iv. evaluation and managerial control.

Work-in-progress is generally done on estimated basis which leads to inaccuracy in total cost calculations.

v.

The computation of average cost is more difficult in those cases where more than one type of products is manufactured and a division of the cost element is necessary.

vi.

Where di ffer ent prod uct s ari se i n t he sam e process and common costs are prorated to various costs units. Such individual products costs may be taken as only approximation and hence not reliable.

Why Company Use It?

Managers need to maintain cost control over the manufacturing process. Process costing provides managers with feedback that can be used to compare similar product costs from one month to the next, keeping costs in line with projected manufacturing budgets.

Products are manufactured in large quantities, but products may be sold in small quantities, sometimes one at a time (automobiles, loaves of bread), a dozen or two at a time (eggs, cookies), etc.

A company may manufacture thousands or millions of units of product in a given period of time.

A fraction-of-a-cent cost change can represent a large dollar change in overall profitability, when selling millions of units of product a month. Managers must carefully watch per unit costs on a daily basis through the production process, while at the same time dealing with materials and output in huge quantities.

Materials part way through a process (e.g. chemicals) might need to be given a value, process costing allows for this. By determining what cost the part processed material has incurred such as labor or overhead an "equivalent unit" relative to the value of a finished process can be calculated.

Product costs must be transferred from Finished Goods to Cost of Goods Sold as sales are made. This requires a correct and accurate accounting of product costs per unit, to have a proper matching of product costs against related sales revenue.

ACCOUNTING PROCEDURE i. Separate Process A/C:- The entire manufacturing operation is divided into separate stages or processes. Each process of production is treated as a distinct cost centre. A separate Process Account is opened to record the cost incurred in each process. ii. Debit side of process A/C:- Each Process Account is charged with the expenses directly incurred for that process and plus its share of the overheads. The Process Account is debited with the direct and indirect expenses (material, wages and overheads) pertaining to that process. a. Material: The raw material, sundry materials and stores required for a process are issued directly from the stores against Material Requisition Slip. In addition, the cost of units transferred from the earlier process, if any, also appears on Debit side of the Process Account. Usually, the distinction between Direct Materials and Indirect Materials is not significant in process costing. b. Labour: Wages paid to workers directly employed in a process are debited to the Process Account (through Pay rolls).like Material, the distinction between Direct and Indirect Labour is not important in Process Costing. Indirect Labour expenses (e.g. managers salaries) may, if necessary, be debited on the basis of ratio of direct wages. c. Expenses: The expenses directly related to the directly related to the process such as repairs of machinery ,power etc. are debited to the respective process account. iii. Credit Side of Process A/c(sale value of residue): The process Account is credited with the sale values of residue etc.

iv.

Net Cost of Process: The Net Cost of the output of the process (Total Cost less Sale Value of Residue) is transferred to the next process.

v.

Average Unit Cost: The Net Cost is divided by the number of Units produced to determine the Average Cost Per Unit in that process.

vi.

Find out Normal loss: To fix the percentage of Normal Loss on the basis of technical studies or past experience.

PRO-FORMA: 1 PROCESS ACCOUNT

Particulars To Op. stock To Materials To Labour To OH To Abnormal gains

Units xx xx xx xx xx

Rate xx xx xx xx xx

Rs. xx xx xx xx xx

Particulars By Normal loss

Units xx

Rate Rs. xx xx

By Abnormal loss xx By output transfer to next process By Cl.bal. WIP xx xx

xx xx

xx xx

VALUATION OF WORK-IN-PROGRESS

Meaning of Work-in-Progress:
Since production is a continuous activity, there may be some incomplete production at the end of an accounting period. Incomplete units mean those units on which percentage of completion with regular to all elements of cost (i.e. material, labour and overhead) is not 100%. Such incomplete production units are known as Work-in-Progress. Such Work-inProgress is valued in terms of equivalent or effective production units.

Meaning of equivalent production units :

This represents the production of a process in terms of complete units. In other words, it means converting the incomplete production into its equivalent of complete units. The term equivalent unit means a notional quantity of completed units substituted for an actual quantity of incomplete physical units in progress, when the aggregate work content of the incomplete units is deemed to be equivalent to that of the substituted quantity. The principle applies when operation costs are apportioned between work in progress and completed units.

Equivalent units of work in progress = Actual no. of units in progress x Percentage of work completed

Equivalent unit should be calculated separately for each element of cost (viz. material, labour and overheads) because the percentage of completion of the different cost component may be different.

Accounting Procedure:
The following procedure is followed when there is Work-in- Progress Find out equivalent production after taking into account of the process losses, degree of completion of opening and / or closing stock. Find out net process cost according to elements of costs i.e. material, labour and overheads. Ascertain cost per unit of equivalent production of each element of cost separately by dividing each element of costs by respective equivalent production units. Evaluate the cost of output finished and transferred work in progress The total cost per unit of equivalent units will be equal to the total cost divided by effective units and cost of work-in- progress will be equal to the equivalent units of work-in- progress multiply by the cost per unit of effective production. In short the following from steps an involved.

Step 1 Step 2 Step 3 Step 4

prepare statement of Equivalent production Prepare statement of cost per Equivalent unit Prepare of Evaluation Prepare process account

The problem on equivalent production may be divided into four groups. a. when there is only closing work-in-progress but without process losses b. when there is only closing work-in-progress but with process losses c. when there is only opening as well as closing work-in- progress without process losses d. when there is opening as well as closing WIP with process losses.

Situation a : Only closing work-in-progress without process losses : In this case, the existence of process loss is ignored. Closing work-in-progress is converted into equivalent units on the basis of estimates on degree of completion of materials, labour and production overhead. Afterwards, the cost pr equivalent unit is calculated and the same is used to value the finished output transferred and the closing work-in-progress

Situation b: When there is closing work-in-progress with process loss or gain. If there are process losses the treatment is same as already discussed in this chapter. In case of normal loss nothing should be added to equivalent production. If abnormal loss is there, it should be considered as good units completed during the period. If units scrapped (normal loss) have any reliable value, the amount should be deducted from the cost of materials in the cost statement before dividing by equivalent production units. Abnormal gain will be deducted to obtain equivalent production.

Situation c: Opening and closing work-in-progress without process losses. Since the production is a continuous activity there is possibility of opening as well as closing work-in-progress. The procedure of conversion of opening work-in-progress will vary depending on the method of apportionment of cost followed viz, FIFO, Average cost Method and LIFO.

(1) Format of statement of Equivalent Production :

Input Particulars Opening Units Stock Introduced xx Output Units Particulars Units xx xx Units Normal completed Abnormal Loss Equivalent Loss Units xx xx xx xx Material % Units xx xx -xx xx -xx xx Equivalent Labour Overheads Production % Units % Units xx xx -xx xx -xx xx xx Xx

(2) Statement of cost per Equivalent Units :

Element of costing

Cost Rs. Xx Xx Xx xx

Equivalent Units Xx Xx xx

Cost per Equivalent Xx Units Xx Rs Xx Xx

Material Cost (Net) Labour Cost Overheads Cost

(3) Statement of Evaluation

Particulars Element of cost Units completed Material Labour Overheads Material Labour Overheads Material Labour Overheads Equivalent Units xx xx xx xx xx xx xx xx xx Cost per equivalent units xx xx Rs. xx xx xx xx xx xx xx Cost Rs. xx xx xx xx xx xx xx xx xx Total Cost Rs. Xx

Closing WIP

Xx

Abnormal Loss

Xx

Methods of valuation of WIP

FIFO METHOD

FIFO method assumes that the work on the opening stock is completed first, before the materials put into the process during the current period are taken up. The units completed during the process being usually more than the opening stock, it is assumed that no units from the opening WIP will be left incomplete and so none of them will find place in the closing WIP. In FIFO method, the procedure of calculation of equivalent unit is different as the units competed from the opening WIP and from current production have to be accounted for seperatly. Evalution of method FIFO system is neither suitable nor rational when spoiled units are involved becoz a aaportionment of such unit between the opening inventory and current production is not possible FIFo method is more suitable from the point of view of control as the past and current costs are separated. The FIFO method is, therefore, not much used in practice. Whenever used, it is applied to the last process from where the finished product emerges.

WEIGHTED AVERAGE METHOD

Under this method, total costs in the process are divided by the total equivalent units produced by the process to ascertain the costs per equivalent unit. Total costs of the process mean the total of the current production costs and cost of the opening WIP. According to this method, the cost of the opening WIP is added to the cost incurred in the current period and average cost worked out. It should be noted that in calculating the equivalent units under the weighted average method, the work done in the past is treated as if done in the current period. The closing WIP under this method is made of the average costs of opening WIP and current production. EXAMPLE The following details are given for the textile factory for a month of march 2010 Opening WIP Materials (100% completed) Labour OH (60% completed) (60% completed) 5000 units Rs. 18750 Rs. 7500 Rs. 3750 17500 units 17500 units

Unit introduced into the process Unit transferred to the next process Process cost for the month Material Labour OH Cl. WIP Rs. 250000 Rs. 195000 Rs. 97000

(Degree of completion : Mat- 100%, Lab- 50%, OH- 50%) Prepare the process A/C, show the relevant working on the basis of Weighted Average Cost.

SOLUTION:

PROCESS A/C
Particulars To op. stock Units 5000 Rs. 30000 Particulars By output Trf. to next process To input To Labour To OH 22500 17500 250000 190000 97500 567500 22500 567500 By Cl. stock 5000 97691 Units 17500 Rs. 474809

Statement of equivalent production

Input Units 5000 17500 Op.stock Input introduced Closing Stock 22500 22500 22500 20000 20000 5000 100 5000 50 2500 50 2500 17500 100 17500 100 17500 100 17500 Particular output Units Material % EU Labour % EU Overheads % EU

Statement of cost per equivalent units

Particulars Op. stock material Cost 18750+250000 =268750 Labour Overheads 202500 101250 20000 20000 10.125 5.0625 Equivalent units 22500 Cost per units 11.9444

Statement of Evaluation

Particulars

Element of cost

Equivalent Units 17500 17500 17500 5000 2500 2500

Cost per equivalent units Rs. 11.9444 10.125 5.0625 11.9444 10.125 5.0625

Cost Rs. 474809

Units completed Material Labour Overheads Closing WIP Material Labour Overheads

97691

PROCESS LOSSES AND GAINS In many process, some loss is inevitable. Certain production techniques are of such a nature that some loss is inherent to the production. Wastages of material, evaporation of material is un avoidable in some process. But sometimes the Losses are also occurring due to negligence of Labourer, poor quality raw material, poor technology etc. These are

normally called as avoidable losses. Basically process losses/ gains are classified into: Normal Loss Abnormal Loss Abnormal gain 1. Normal Loss: Normal loss is an unavoidable loss which occurs due to the inherent nature of the materials and production process under normal conditions. It is normally estimated on the basis of past experience of the industry. It may be in the form of normal wastage, normal scrap, normal spoilage, and normal defectiveness. This may be due to reasons such as evaporation, testing or rejects. It may occur at any time of the process. Normal Loss =No of units of normal loss: Input x Expected percentage of The cost of normal loss is a process. If the normal loss units can be sold as a crap then the sale value is credited with process account. If some rectification is required before the sale of the normal loss, then debit that cost in the process account. After adjusting the normal loss the cost per unit is calculates with the help of the following formula: Cost of good unit: Total cost increased Sale Value of Scrap Input Normal Loss units

2. Abnormal Loss: Any loss caused by unexpected abnormal conditions such as plant breakdown, substandard material, carelessness, accident etc. such losses are in excess of pre-determined normal losses. This loss is basically avoidable. Thus abnormal losses arrive when actual losses are more than expected losses. The units of abnormal losses in calculated as under: Abnormal Losses = Actual Loss Normal Loss The value of abnormal loss is done with the help of following formula: Value of Abnormal Loss:

Cost of process increase Scrap Value of normal Loss x Units of abnormal loss Input units Normal Loss Units

Abnormal Process loss should not be allowed to affect the cost of production as it is caused by abnormal (or) unexpected conditions. Such loss representing the cost of materials, labour and overhead charges called abnormal loss account. The sales value of the abnormal loss is credited to Abnormal Loss Account and the balance is written off to costing P & L A/c. PRO FORMA : 2 Dr. Particulars To Process A/c. Units xx Rs. xx Particulars By Bank By Costing P & L A/c. Units xx xx xx Abnormal Loss A/c. Cr. Rs. xx xx xx

xx

xxx

Example :

(Normal loss and Abnormal loss)

Product A passes through 3 processes and in April 2011 the following information is obtain in respect of Process II:-

Opening stock

2800 unit

Rs. 1200

Comparising Rs. 700 for material, Rs. 1580 for labour and Rs. 350 for OH (Degree of completion Material- 60%, Labour- 40% and OH- 40%) Transfer for Process I Transfer to process III 14000 unit 12000 unit Rs. 1560 Rs. 2000 Rs. 4400 2000 Rs.0.40each 2800 units Rs. 0.20 each

Direct Material added in process II Direct labour Production OH Unit scrap (total normal wastage ) Unit scrap realised Closing stock

(Degree of completion Material- 80%, Labour- 60%, OH- 60%) Normal loss during production is 10% of unit transferred from the earlier process Prepare Process II A/C for April 2011 during the statement of Equivalent Production Cost Per Unit and Evalution.

Solution: PROCESS A/C Particulars To Op. Bal. To Trf. from Process I To Material Units 2800 14000 Rs. 1200 2800 1560 Particulars By Normal loss By Abnormal loss By output Trf. to process III To Labour To OH 16800 2000 4400 11960 16800 11960 By Cl. stock 2800 1580 Units 1400 600 12000 Rs. 560 470 9350

a) Statement of equivalent production Input Units 2800 14000 Op.stock Trf. from process I Normal loss Closing Stock Abnormal loss 16800 1400 2800 600 16800 100 100 2800 600 12600 80 100 2240 600 13160 60 100 1680 600 13160 60 100 1680 600 13160 Particular output Units 2800 9200 100 9200 Material I % EU Material II % 40 100 EU 1120 9200 Labour % 60 100 EU 1680 9200 Overheads % 60 100 EU 1680 9200

b) Statement of cost per equivalent units Particulars Material I Material introduced Labour Overheads Cost 2240 1560 2000 4400 Equivalent units 12600 13160 13160 13160 Cost per units 0.19 0.12 0.15 0.33

c) Statement of Evaluation Particulars Element of cost Opening balance Material II Labour Overheads Current input Material I Material II Labour Overheads Abnormal loss Material I Material II Labour Overheads Closing stock Material I Material II Labour Overheads Equivalent Units 1120 1680 1680 9200 9200 9200 9200 600 600 600 600 2800 2240 1680 1680 Cost per equivalent units Rs. 0.1185 0.1519 0.3343 0.1778 0.1185 0.1519 0.3343 0.1778 0.1185 0.1519 0.3343 0.1778 0.1185 0.1519 0.3343 133 255 562 1636 1090 1397 3076 107 71 91 201 498 265 255 560 Value Cost Rs.

950

7199 470

1580

3. Abnormal Gains: The margin allowed for normal loss is an estimate (i.e. on the basis of expectation in process industries in normal conditions) and slight differences are bound to occur between the actual output of a process and that anticipates. This difference may be positive or negative. If it is negative it is called ad abnormal Loss and if it is positive it is Abnormal gain i.e. if the actual loss is less than the normal loss then it is called as abnormal gain. The value of the abnormal gain calculated in the similar manner of abnormal loss. The formula used for abnormal gain is:

Abnormal Gain Total Cost incurred Scrap Value of Normal Loss x Abnormal Gain Unites Input units Normal Loss Units

The sales values of abnormal gain units are transferred to Normal Loss Account since it arrive out of the savings of Normal Loss. The difference is transferred to Costing P & L A/c. as a Real Gain.

PRO FORMA: 3 Dr. Particulars To Normal Loss A/c.Costing P & L To A/c.

Abnormal Gain A/c. Cr. Units xx xx xx Rs. xx xx xx xx xx Particulars By Process A/c. Units xx Rs. xx

Example: - ( abnormal gain ) The following data pertains to process I for the month of January 2010 in Sun Ltd. Opening WIP 1500 unit Rs.15000

(Degree of completion material 100%, labour and overhead 33 1/3%) Input of material directly in process I Direct labour Overhead Closing WIP 18500unit Rs.14000 Rs.18000 5000 unit 18000 units Rs.52000

(Degree of completion mat 90%, labour and OH -30%) There is normal loss of 10% of the total input i.e. opening WIP + Units input in the process, which released Rs 2 per unit as scrap. Unit transferred to the next process were rs 15000. Required to prepare process A/c giving details working as to the calculation of equivalent unit for each of the cost elements and valuation of WIP transferred to the next process, closing WIP and abnormal element if any all in this factor the process 1 for the given month.

SOLUTION: Particulars To Op. Bal. To Material Units 1500 18500

PROCESS A/C Rs. 15000 52000 Particulars By Normal loss By output Trf. to process III Units 2000 15000 Rs. 4000 99000

To Labour To OH To Abnormal gains 2000 22000

14000 28000 12000 121000

By Cl. stock

5000

18000

22000

121000

b) Statement of equivalent production

Input Units 1500 Op.stock input materials 18500 Directly in process I Normal loss 2000 Abnormal gains 22000 22000 16000 14000 14000 2000 100 (-2000) 100 (-2000) 100 (-2000) 13500 100 13500 100 13500 100 13500 Particular output Material Units 1500 % EU 0 Overheads % 66 2/3 EU 1000 Labour % 66 2/3 EU 1000

c) Statement of cost per equivalent units

Particulars Material Labour Overheads Cost 52000 14000 28000 Equivalent units 16000 14000 14000 Cost per units 3.00 1.00 2.00

d) Statement of Evaluation

Particulars

Element of cost

Equivalent Units 1000 1000 13500 13500 13500 2000 2000 2000 4500 1500 1500

Cost per equivalent units Rs. 3 1 2 3 1 2 3 1 2 3 1 2

Value

Cost Rs.

Opening balance Material Labour Overheads Current input Material Labour Overheads Abnormal gains Material I Labour Overheads Closing stock Material I Labour Overheads

1000 2000 40500 13500 27000 6000 2000 4000 13500 1500 3000

3000 81000

12000

18000

Abnormal Gains A/C

Dr. Particular To Normal Loss A/C By Costing P/L A/C Rs. 4000 8000 12000 12000 Particular By process I Rs. 12000 Cr.

Normal Loss A/C

Dr. Particular To Normal Loss A/C Rs. 4000 4000 Particular By Abnormal Gain A/C Rs. 4000 4000 Cr.

INTER PROCESS PROFITS:

Normally the output of one process is transferred to another process at cost but sometimes at a price showing a profit to the transfer process. The transfer price may be made at a price corresponding to current wholesale market price or at cost plus an agreed percentage. The advantage of the method is to find out whether the particular process is making profit (or) loss. This will help the management whether to process the product or to buy the product from the market. If the transfer price is higher than the cost price then the process account will show a profit. The complexity brought into the accounting arises from the fact that

the inter process profits introduced remain a part of the prices of process stocks, finished stocks and work-in-progress. The balance cannot show the stock with profit. To avoid the complication a provision must be created to reduce the stock at actual cost prices. This problem arises only in respect of stock on hand at the end of the period because goods sold must have realized the internal profits. The unrealized profit in the closing stock is eliminated by creating a stock reserve. The amount of stock reserve is calculated by the following formula.

Stock Reserve = Transfer Value of stock x Profit included in transfer price Transfer Price

For Example :A certain product passes through 3 process before it is completed. The outpu of each process is charge to the next process at price that gives profit of 20% on the transfer price. The output of process 3 is transfer to finished stock on the same basis. There was no WIP at the start of the year and assume nil overheads. The following data is available for the year 2012 Particular Direct Mat. Direct Wages St. on 31/12/12 Sales during 2012 Process I 4000 6000 2000 Process II 6000 4000 4000 Process III 2000 8000 6000 F.G 3000 36,000

Prepare process I, II, and III A/c and workout the stock reserve adjusted from the B/S.

SOLUTION

Process I
Particular Total Rs. Cost Rs. Profit Rs. Particular Total Rs. Cost Rs. Profit Rs.

To D mat.

4,000

4,000

By transfer to process II

10,000

8,000

2,000

To D wages

,6000

6000 10,000

10,000 (-) Cl.st. 2000 8,000 (+) Profit 2000 2000 10,000 8000 2000 10,000 8000 2000 2000 8,000 -

Process II
Particular Total Rs. To transfer 10,000 from process I To D mat. To D wages 2000 20,000 (-) Cl.st. 4000 18,000 3600 400 1,600 16,000 (+) Profit 25 % 20,000 14,400 5,600 20,000 14,400 5,600 4000 14,400 4000 6000 4,000 6000 4,000 8,000 Cost Rs. Profit Rs. 2,000 By transfer to process II Particular Total Rs. 20,000 14,400 Cost Rs. Profit Rs. 5,600

Process III
Particular Total Rs. Cost Rs. Profit Rs. Particular Total Rs. Cost Rs. Profit Rs.

To transfer 20,000 from process II To D mat. To D wages 2000 ,8000

14,400

5,600

By transfer to process II

30,000

19,520

10,480

2000 8000

5,600 30,000 (-) Cl.st. 6000 24,400 4880 1120 4480 24,000 (+) Profit 20% 30,000 19,520 10,480 30,000 19,520 10,480 6000 19,520 6000

Finished Stock A/c

Particular Total Rs. Cost Rs. Profit Rs. Particular Total Rs. Cost Rs. Profit Rs.

To transfer from process III (-) Cl.st.

30,000

19,520

10,480

By sales

36,000

17,568

18,432

3000 27,000

1952 17,568 17,568

1048 9432 9000 18,432 36,000 17,568 18,432

(+) Profit

9000 36,000