Cost Accounting · Cost Book-Keeping

Cost Ledgers and Cost Control Accounts Explained

Updated 10 October 2026 · Fact-checked

Cost ledgers are the books that record costs of materials, labour, expenses and production, such as the Stores Ledger, WIP Ledger and Finished Goods Ledger. Control accounts summarise each group of ledgers. To solve questions, post each transaction once to the control account and the matching subsidiary ledger, then check that totals agree.

Understand Cost Ledgers and Cost Control Accounts

Cost book-keeping records cost transactions in a way that shows the cost of each job, process or product. It can be kept in two ways. In an integral system, one set of books serves both cost and financial purposes. In a non-integral system, cost accounts are kept separately from the financial books, and the two are reconciled.

Cost accounts are kept in subsidiary ledgers. The main ones are the Stores Ledger (one account per material, with quantity and value), the Wages or Labour Ledger, the Overhead Ledger (one account per overhead head), the Work-in-Progress (WIP) Ledger (one account per job, batch or process) and the Finished Goods Ledger (one account per product). Each holds detail.

A control account is a summary account in the main ledger. It holds the total of one group of subsidiary accounts. The Stores Ledger Control Account holds the total of all material accounts. The WIP Control Account holds the total of all job or process accounts. The Finished Goods Control Account holds the total of all product accounts. The detail sits in the subsidiary ledgers and the totals sit in the control accounts, so the two can be checked against each other.

In a non-integral system, the Cost Ledger is the main ledger and holds the control accounts. Since it is kept apart from the financial books, it needs a balancing account. This is the Cost Ledger Control Account (also called the General Ledger Adjustment Account). It stands in for all the financial accounts. Every entry in the cost ledger that does not have a cost-account twin is posted against it. For example, materials purchased are debited to Stores Control and credited to the Cost Ledger Control Account.

The difference from the General (Financial) Ledger is simple. The financial ledger records transactions by nature (assets, liabilities, income, expenses) for the Balance Sheet and Statement of Profit and Loss. The cost ledger records the same activity by cost object and element, for cost ascertainment and control. The cost ledger has no personal or asset accounts like Debtors or Bank.

Key rules to remember

Non-integral entry rule: Dr. Cost control account / Cr. Cost Ledger Control A/c, for items arising outside the cost books; Purchases, wages paid and expenses incurred are credited to Cost Ledger Control A/c. Internal transfers between cost accounts do not touch it.
Stores Control A/c balance: Closing stock = Opening stock + Purchases + Returns from shop floor − Issues − Returns to supplier − Losses; The balance must equal the total of all Stores Ledger account balances.
WIP Control A/c balance: Closing WIP = Opening WIP + Direct material + Direct labour + Direct expenses + Overhead absorbed − Cost of goods completed; Use cost of production transferred to Finished Goods Control A/c.
Finished Goods Control A/c balance: Closing finished goods = Opening + Cost of production transferred − Cost of goods sold; Cost of goods sold is transferred to Costing Profit and Loss A/c.
Costing profit: Costing profit = Sales − Cost of goods sold − Under-absorbed overheads (+ over-absorbed overheads) − Administration and selling overheads where not absorbed; Sales are credited to Costing P&L and debited to Cost Ledger Control A/c. Adjust the overhead difference as the question directs.
Trial balance check: Total debit balances of cost ledger = Total credit balances of cost ledger; Cost Ledger Control A/c normally carries a credit balance equal to the net total of the debit balances of the other cost accounts.

How to solve Cost Ledgers and Cost Control Accounts questions

Use this method for any non-integral cost ledger question, where you are asked for ledger accounts, journal entries or a trial balance.

1Read the question and note the opening balances. Check whether they are given for Stores, WIP, Finished Goods and any overhead accounts.
2Open the control accounts you need: Cost Ledger Control, Stores Control, Wages Control, Overhead Control, WIP Control, Finished Goods Control and Costing P&L. Enter the opening balances on the debit side. Credit the Cost Ledger Control A/c with their total.
3Go through the transactions one at a time. For each, decide the debit and the credit. If the item comes from outside the cost books, the credit or debit goes to Cost Ledger Control A/c.
4Split the materials and wages into direct and indirect. Direct goes to WIP Control. Indirect goes to Overhead Control.
5Absorb overheads into WIP at the stated rate or amount. Show any under or over absorption as the balance left in Overhead Control, then move it to Costing P&L.
6Transfer the cost of completed production from WIP to Finished Goods. Transfer cost of goods sold from Finished Goods to Costing P&L. Credit Sales to Costing P&L.
7Balance each account and bring down the closing balance. Prepare the trial balance if asked, and check that debits equal credits.
8Write the journal entry with narration where the question asks for it, and label every account clearly.

Quickest way: Shortcut by T-account chain

When to use it: Use this when time is short and you must produce the control accounts from a list of figures.

Draw the chain first: Stores → WIP → Finished Goods → Costing P&L, with Wages and Overhead feeding into WIP.
Fill each account with its opening balance and the single figure given for it. Find missing figures as balancing figures, for example materials issued = opening + purchases − closing.
Pass the total of each account to the next. The credit side of one account is the debit side of the next.
Do the Cost Ledger Control A/c last. It collects all external items, so its balance acts as your check.
Check the trial balance. If it does not agree, look for a one-sided entry or an entry posted to the wrong control account.

Common mistakes in Cost Ledgers and Cost Control Accounts

Crediting Cost Ledger Control A/c for internal transfers such as materials issued to WIP.
Students treat every entry as needing a link to the financial books.
Fix: Use Cost Ledger Control only when the other side of the entry lies outside the cost books. Issues to production go Dr. WIP Control, Cr. Stores Control.
Debiting indirect materials or indirect wages to WIP Control.
The question states total issues or wages without a split, and students post the whole amount to production.
Fix: Separate direct from indirect first. Only direct goes to WIP. Indirect goes to Overhead Control.
Forgetting to show the transfer of under or over absorbed overheads to Costing P&L.
Students stop once overheads have been absorbed into WIP.
Fix: After absorption, the balance in Overhead Control is the difference. Transfer it to Costing P&L and say whether it is under or over absorbed.
Crediting Finished Goods Control with sales at selling price instead of cost of goods sold.
Students confuse revenue with the cost of goods sold.
Fix: Credit Finished Goods Control at cost with Dr. Costing P&L. Record sales separately as Dr. Cost Ledger Control, Cr. Costing P&L at selling price.
Mixing up control accounts with subsidiary ledgers in the answer.
The terms look alike and the question may use both.
Fix: Remember that a control account is a total in the main ledger, and a subsidiary ledger holds the individual accounts. Define each in one line if a theory part is asked.
Treating items like Bank, Debtors or Creditors as cost ledger accounts.
Students carry over habits from financial accounting.
Fix: Cost ledgers do not keep these. In a non-integral system, replace them with the Cost Ledger Control A/c.

Worked examples

Example 1

A company keeps non-integral cost accounts. Opening balances: Stores ₹2,00,000; WIP ₹1,50,000; Finished Goods ₹1,00,000. Transactions: materials purchased ₹6,00,000; materials issued to production ₹5,00,000; materials issued for indirect use ₹40,000; wages paid ₹3,00,000, of which direct ₹2,40,000 and indirect ₹60,000; factory overheads incurred ₹1,00,000 (other than indirect materials and wages); overheads absorbed in production ₹1,90,000; cost of finished goods transferred ₹10,00,000. Prepare the journal entries for these transactions and find the closing balance of Stores, WIP and the amount of overheads under or over absorbed.

Show the solution

Purchases: Dr. Stores Control ₹6,00,000; Cr. Cost Ledger Control ₹6,00,000.
Issue to production: Dr. WIP Control ₹5,00,000; Cr. Stores Control ₹5,00,000.
Indirect materials: Dr. Overhead Control ₹40,000; Cr. Stores Control ₹40,000.
Wages paid: Dr. Wages Control ₹3,00,000; Cr. Cost Ledger Control ₹3,00,000. Then Dr. WIP Control ₹2,40,000 and Dr. Overhead Control ₹60,000; Cr. Wages Control ₹3,00,000.
Factory overheads incurred: Dr. Overhead Control ₹1,00,000; Cr. Cost Ledger Control ₹1,00,000.
Overheads absorbed: Dr. WIP Control ₹1,90,000; Cr. Overhead Control ₹1,90,000.
Transfer of finished goods: Dr. Finished Goods Control ₹10,00,000; Cr. WIP Control ₹10,00,000.
Closing Stores = 2,00,000 + 6,00,000 − 5,00,000 − 40,000 = ₹2,60,000.
Closing WIP = 1,50,000 + 5,00,000 + 2,40,000 + 1,90,000 − 10,00,000 = ₹80,000.
Overheads incurred = 40,000 + 60,000 + 1,00,000 = ₹2,00,000. Absorbed = ₹1,90,000. Under absorbed = ₹10,000.

Answer: Closing Stores ₹2,60,000; closing WIP ₹80,000; overheads under absorbed by ₹10,000, to be transferred to Costing P&L.

Example 2

From the following, prepare the Costing Profit and Loss Account and find the profit. Cost of goods sold ₹12,00,000; sales ₹15,00,000; administration overheads ₹90,000; selling overheads ₹60,000; factory overheads over absorbed ₹20,000. Administration and selling overheads are not absorbed in production cost and are charged to Costing P&L. Also state the entry to close the Costing P&L balance.

Show the solution

Debit side: Cost of goods sold ₹12,00,000; administration overheads ₹90,000; selling overheads ₹60,000. Total debits = ₹13,50,000.
Credit side: Sales ₹15,00,000; over absorbed factory overheads ₹20,000. Total credits = ₹15,20,000.
Profit = 15,20,000 − 13,50,000 = ₹1,70,000.
Check: Sales − cost of goods sold = ₹3,00,000. Less admin and selling ₹1,50,000 gives ₹1,50,000. Add over absorption ₹20,000 gives ₹1,70,000.
Closing entry: Dr. Costing P&L ₹1,70,000; Cr. Cost Ledger Control ₹1,70,000. The credits exceed the debits, so the profit is a credit balance in Costing P&L. It is closed by transferring it to the Cost Ledger Control A/c, which represents the financial books.

Answer: Costing profit is ₹1,70,000. Close it by debiting Costing P&L and crediting Cost Ledger Control A/c with ₹1,70,000, because the credit balance of Costing P&L is transferred to the account that represents the financial books.

Exam tips

Most questions ask for control accounts, journal entries or a trial balance. Check which one is asked before you start, and give only that.
Always write the account name in full, such as Stores Ledger Control A/c, and add a one-line narration to each journal entry. Step marks depend on a clear layout.
For MCQs, the usual traps are what the Cost Ledger Control A/c is called, which entries pass through it, and the difference between control and subsidiary ledgers. Learn these three points well.
Keep a quick check on every answer: the trial balance must agree, and each control account must equal the total of its subsidiary ledger.
If a theory part appears, give the difference between cost ledger and general ledger in two or three clear points, then support it with a short example.

Practice questions from Cost Book-Keeping

Cost Ledgers and Cost Control Accounts in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Cost Ledgers and Cost Control Accounts: frequently asked questions

What is a cost control account?

A cost control account is a summary account in the main cost ledger. It holds the total of a group of subsidiary accounts, such as all the material accounts in the Stores Ledger. It lets you check the accuracy of the detailed ledgers.

What is the difference between a cost ledger and a general ledger?

The general ledger records transactions by their nature to prepare financial statements. The cost ledger records costs by element and by job, process or product to ascertain and control cost. The cost ledger does not hold accounts like Debtors or Bank.

What is the Cost Ledger Control Account?

It is the account in a non-integral system that stands in for the financial books. It collects entries that have no matching cost account, such as purchases, wages paid, expenses and sales. It is also called the General Ledger Adjustment Account.

What are the main ledgers in cost accounting?

They are the Cost Ledger, Stores Ledger, Wages Ledger, Overhead Ledger, Work-in-Progress Ledger and Finished Goods Ledger. The Cost Ledger holds the control accounts. The others are subsidiary ledgers that hold the detail.