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CA Intermediate · Cost and Management Accounting · Cost Accounting Systems

In an integrated accounting system, a firm purchases raw materials on credit for Rs 50,000. Which entry records this purchase?

The purchase is recorded by debiting Stores Ledger Control Account and crediting Creditors Account. Materials are received into stores at purchase, and only on issue to production are they transferred to Work-in-Progress, so WIP is not debited at the time of purchase.

  1. ADebit Stores Ledger Control Account, credit Creditors AccountCorrect
  2. BDebit Creditors Account, credit Stores Ledger Control Account
  3. CDebit Work-in-Progress Control Account, credit Creditors Account
  4. DDebit Costing Profit and Loss Account, credit Creditors Account

Explanation

In integrated accounting, cost and financial records are combined in a single set of books. Material purchased goes into stores, so Stores Ledger Control A/c is debited and Creditors credited. Debiting WIP would be wrong because material has not yet been issued to production.

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