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CA Intermediate · Cost and Management Accounting · Cost Accounting Systems

In an integrated accounting system, a manufacturing company in Pune pays factory wages of Rs 40,000. Which entry is made for the wages paid, assuming wages are first booked in a control account before being charged to production?

The entry is Debit Wages Control Account and Credit Bank Account. Wages paid are first collected in the control account, and only later is the amount transferred to work-in-progress as direct wages or to factory overhead as indirect wages.

  1. ADebit Wages Control Account, Credit Bank AccountCorrect
  2. BDebit Work-in-Progress Control Account, Credit Bank Account
  3. CDebit Bank Account, Credit Wages Control Account
  4. DDebit Factory Overhead Control Account, Credit Wages Control Account

Explanation

On payment, the wages control account is debited because it collects wage costs, and bank is credited. Allocation to WIP or overheads happens later from the control account. Debiting WIP directly skips the control stage, which the question states is followed.

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