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CA Intermediate · Cost and Management Accounting · Cost Accounting Systems

A firm keeps its cost accounts on a non-integrated basis, maintaining separate Cost Ledger and Financial Ledger. In the cost books, which account is used to record the balancing of the double entry because the cost books do not carry real and personal accounts?

The Cost Ledger Control Account, also called the General Ledger Adjustment Account, is used. Cost books carry no real or personal accounts, so this account records the other side of every entry and keeps the cost ledger's double entry complete and balanced.

  1. ACost Ledger Control AccountCorrect
  2. BProfit and Loss Adjustment Account
  3. CStores Ledger Control Account
  4. DWork-in-Progress Control Account

Explanation

In a non-integrated (cost ledger) system, the Cost Ledger Control Account (also called General Ledger Adjustment Account) takes the place of personal and real accounts and completes the double entry. Stores, WIP and other control accounts are part of the cost books but are not the balancing account for the whole ledger.

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