Cost Accounting · Cost Book-Keeping

Integral vs Non-Integral Accounting Systems Explained

Updated 10 October 2026 · Fact-checked

In an integral (integrated) system, one set of books holds both financial and cost accounts, so no separate cost ledgers or reconciliation are needed. In a non-integral system, cost and financial accounts are kept separately and linked through control accounts, so a reconciliation of profits is required. Solve questions by passing the right entries in each system.

Understand Integral and Non-Integral Accounting Systems

Every business needs financial accounts for statutory reporting. It also needs cost accounts for control and decision making. The question is whether you keep one set of books or two.

In the non-integral system (also called cost ledger or non-integrated system), financial accounts and cost accounts are kept separately. The financial books record items under their natural heads such as purchases, wages and expenses. The cost books record the same facts under cost heads such as Stores Ledger Control, Wages Control and Overheads Control. The two sets are tied together by a General Ledger Adjustment Account (Cost Ledger Control Account) in the cost books. Because profits are worked out twice, they usually differ, and you must reconcile them.

In the integral system (integrated accounts), one set of books serves both purposes. Entries are made once, under heads that show cost information straight away, such as Stores Control, Wages Control, Works Overhead Control, Work-in-Progress Control and Finished Goods Control. Creditors, debtors, cash and bank accounts sit in the same ledger. There is no General Ledger Adjustment Account, and no reconciliation is needed because there is only one profit.

Merits of the integral system: no duplication of work, so lower clerical cost; no reconciliation; quicker, up-to-date cost data; one profit figure; better coordination between departments.

Demerits of the integral system: it needs a well-trained staff and a well-designed chart of accounts; it is harder to set up and may be difficult for a small firm; cost and financial staff must work to the same timetable; financial reports may be delayed if cost data is late.

Merits of the non-integral system: cost and financial work can be done independently; the cost department can use its own timing and format; it suits firms that already have a separate cost department.

Demerits of the non-integral system: duplication of effort, higher cost, reconciliation is compulsory, and the two profits may confuse management.

Key rules to remember

Non-integral: key control account: Cost Ledger Control (General Ledger Adjustment) A/c is credited for materials purchased, wages and expenses, for opening balances of the cost-book asset accounts, and for profit transferred from Costing P&L A/c. It is debited for sales (Dr Cost Ledger Control A/c, Cr Costing P&L A/c), for closing balances of the cost-book asset accounts, and for loss transferred from Costing P&L A/c. Opening balances: Dr Stores Ledger Control, WIP Control and Finished Goods Control; Cr Cost Ledger Control A/c. Closing balances: Dr Cost Ledger Control A/c; Cr Stores Ledger Control, WIP Control and Finished Goods Control.; It is a cost-book account only. It stands in for all the financial accounts, such as cash, creditors and debtors, that sit outside the cost books.
Materials purchased (non-integral): Dr Stores Ledger Control A/c; Cr Cost Ledger Control A/c; In the financial books the entry is Dr Purchases, Cr Creditors/Cash. The two entries are made in separate books.
Materials purchased (integral): Dr Stores Control A/c; Cr Creditors/Bank A/c; A single entry. No Cost Ledger Control account appears.
Wages (integral): Dr Wages Control A/c; Cr Bank A/c (and Cr Provident Fund, Employees' State Insurance or TDS payable for deductions). Then Dr WIP Control (direct) and Dr Overhead Control (indirect); Cr Wages Control; Wages Control should be nil after allocating direct and indirect wages.
Overheads (integral): Dr Overhead Control A/c; Cr Bank/Creditors/Provision. Absorption: Dr WIP Control; Cr Overhead Control. Balance = under or over absorption; Transfer under or over absorption to Costing P&L A/c, unless the question says otherwise. Under-absorbed overhead (actual more than absorbed): Dr Costing P&L A/c, Cr Overhead Control A/c. Over-absorbed overhead (absorbed more than actual): Dr Overhead Control A/c, Cr Costing P&L A/c.
Cost of production and sales (integral system): Dr Finished Goods Control; Cr WIP Control. On sale, two separate entries: (1) Dr Debtors; Cr Sales. (2) Dr Cost of Sales; Cr Finished Goods Control.; Sales is at selling price. Cost of sales is at cost. Cost of Sales transferred: Dr Costing P&L A/c, Cr Cost of Sales A/c. Sales transferred: Dr Sales A/c, Cr Costing P&L A/c. These entries are for the integral system only.
Cost of production and sales (non-integral system): Dr Finished Goods Control; Cr WIP Control. On sale, in the cost books: (1) Dr Cost Ledger Control A/c; Cr Costing P&L A/c at selling price. (2) Dr Costing P&L A/c; Cr Finished Goods Control A/c at cost.; There is no Debtors or Sales account in the cost books. Debtors and Sales are recorded in the financial books (Dr Debtors, Cr Sales).

How to solve Integral and Non-Integral Accounting Systems questions

Use the same routine for any question on journal entries or ledger accounts under either system. First decide which system the question asks for.

1Read the question and note the system: integral, non-integral, or a request to compare both.
2List the opening balances and open the control accounts you need: Stores, WIP, Finished Goods, Wages, Overheads, and in non-integral also Cost Ledger Control.
3Pass the entries in order of the production cycle: materials, wages, overheads, production, sales, closing items.
4In an integral system, use Creditors, Bank, Debtors and Provision accounts directly. In a non-integral system, replace them all with Cost Ledger Control A/c.
5Clear Wages Control and Overhead Control to WIP and the Costing P&L account. Treat abnormal loss, under absorption and over absorption exactly as stated.
6Post to ledger accounts, balance each one, and check that the Wages and Overhead control balances are cleared.
7For a comparison question, write the points as a two-column list (or paired bullets): books, reconciliation, staff need, speed of information, cost.

Quickest way: Entry-pair shortcut

When to use it: Use it for journal-entry questions where time is short and the data is a list of transactions.

Decide the credit side first. In the integral system it is Bank or Creditors. In the non-integral system it is Cost Ledger Control A/c.
Keep the debit side identical in both systems: Stores Control, Wages Control, Overhead Control, WIP, Finished Goods, Cost of Sales.
Pass entries in this order: material purchases, material issues, wages paid and allocated, expenses, absorbed overheads, completed units, sales.
Tick each transaction on the question paper as you enter it, so nothing is missed.
Keep the total of each control account at the side of the page. Check that Wages and Overhead controls clear.

Common mistakes in Integral and Non-Integral Accounting Systems

Using Cost Ledger Control A/c in an integral system.
Students learn the non-integral entries first and apply them everywhere.
Fix: In integral accounts, credit Bank, Creditors or the real financial account. Cost Ledger Control appears only in the non-integral system.
Recording sales at cost in the Sales account and Debtors.
Mixing the cost entry with the sales entry.
Fix: Pass two entries: Dr Debtors, Cr Sales at selling price; and Dr Cost of Sales, Cr Finished Goods at cost.
Leaving Wages Control or Overhead Control with a balance.
Direct and indirect wages, or absorbed and actual overheads, are not split properly.
Fix: Credit Wages Control for every rupee sent to WIP and to Overhead Control. For overheads, transfer the under or over absorbed amount to the Costing P&L account.
Saying that no profit reconciliation is ever needed in the non-integral system.
Confusing the two systems.
Fix: Reconciliation is needed in the non-integral system because profits are computed in two sets of books. It is not needed in the integral system.
Writing advantages and disadvantages that are really the same point.
Students memorise a list without understanding it.
Fix: Tie each point to the number of books, reconciliation, staff skill and speed of information. Write one clear point per mark.
Treating all the items that appear only in financial books as cost entries, for example interest, dividends or income tax.
Students forget that integral accounts still keep purely financial items.
Fix: Record such items in the financial section of the ledger. In non-integral accounts they stay out of the cost books entirely.

Worked examples

Example 1

A company uses the integral system. Pass journal entries: (a) materials purchased on credit ₹2,00,000; (b) materials issued to production ₹1,50,000 and to repairs ₹10,000; (c) wages paid ₹80,000, of which direct ₹60,000 and indirect ₹20,000; (d) factory overheads incurred and paid ₹40,000; (e) overheads absorbed in production ₹55,000.

Show the solution

(a) Dr Stores Control A/c ₹2,00,000; Cr Creditors A/c ₹2,00,000.
(b) Dr WIP Control A/c ₹1,50,000; Dr Overhead Control A/c ₹10,000; Cr Stores Control A/c ₹1,60,000.
(c) Dr Wages Control A/c ₹80,000; Cr Bank A/c ₹80,000. Then Dr WIP Control A/c ₹60,000; Dr Overhead Control A/c ₹20,000; Cr Wages Control A/c ₹80,000.
(d) Dr Overhead Control A/c ₹40,000; Cr Bank A/c ₹40,000.
(e) Dr WIP Control A/c ₹55,000; Cr Overhead Control A/c ₹55,000.
Check overheads: debits are 10,000 + 20,000 + 40,000 = ₹70,000. Credit is ₹55,000. The balance is ₹15,000 debit, which is under-absorbed overhead. Dr Costing P&L A/c ₹15,000; Cr Overhead Control A/c ₹15,000.

Answer: Entries are as above. WIP receives ₹1,50,000 + ₹60,000 + ₹55,000 = ₹2,65,000. Under-absorbed overhead of ₹15,000 goes to the Costing P&L account. Wages Control is nil.

Example 2

Pass the same cost entries as in the non-integral system for (a) and (b) above, and state what the financial books would record for (a). Then state two differences between the two systems.

Show the solution

Cost books (a): Dr Stores Ledger Control A/c ₹2,00,000; Cr Cost Ledger Control A/c ₹2,00,000.
Financial books (a): Dr Purchases A/c ₹2,00,000; Cr Creditors A/c ₹2,00,000.
Cost books (b): Dr WIP Control A/c ₹1,50,000; Dr Overhead Control A/c ₹10,000; Cr Stores Ledger Control A/c ₹1,60,000.
Difference 1: the non-integral system keeps two sets of books linked by Cost Ledger Control A/c. The integral system keeps one set.
Difference 2: profits from the two non-integral sets must be reconciled. There is only one profit in the integral system.

Answer: Cost books: Dr Stores Ledger Control ₹2,00,000, Cr Cost Ledger Control ₹2,00,000; Dr WIP ₹1,50,000, Dr Overhead Control ₹10,000, Cr Stores Ledger Control ₹1,60,000. Financial books for (a): Dr Purchases, Cr Creditors ₹2,00,000. Differences: number of books, and need for reconciliation.

Exam tips

Read the question for the word integral, integrated or non-integral. The credit side of most entries changes with it.
Write a short narration under each entry. Narrations help the examiner see your logic when a figure is wrong.
For theory, give merits and demerits in separate bullet lists, and add a one-line definition of each system first.
For ledger problems, post and balance each control account in a neat T-form, and show the transfer to Costing P&L clearly.
Practise the MCQ trap: the General Ledger Adjustment Account belongs only to the non-integral system.

Practice questions from Cost Book-Keeping

Integral and Non-Integral Accounting Systems in other exams

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

CA IntermediateIntegral and Non-Integral Accounting Systems

Integral and Non-Integral Accounting Systems: frequently asked questions

What is the main difference between integral and non-integral accounting?

An integral system keeps financial and cost accounts in a single set of books. A non-integral system keeps them in separate books linked by a Cost Ledger Control (General Ledger Adjustment) account. This is why reconciliation is needed only in the non-integral system.

Is reconciliation of cost and financial accounts needed in integrated accounting?

No. There is one set of books and one profit, so there is nothing to reconcile. In a non-integral system you must reconcile, because two profits are computed separately.

What are the advantages of the integrated accounting system?

It avoids duplicate work, removes the need for reconciliation, gives faster cost information and shows a single profit figure. It also improves coordination between cost and finance staff.

Which account replaces cash and creditors in the non-integral cost books?

The Cost Ledger Control Account, also called the General Ledger Adjustment Account. It stands in for all the financial accounts that are kept in the financial books.