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CA Intermediate · Cost and Management Accounting · Cost Accounting Systems

In an integrated (integral) accounting system, a company issues direct materials worth ₹80,000 and indirect materials worth ₹12,000 to production. Which entry is correct?

Direct materials of ₹80,000 are debited to Work-in-Process, indirect materials of ₹12,000 to Overhead Control, and Stores Ledger Control is credited ₹92,000. Indirect materials are overheads, not direct cost, and no Cost Ledger Control account is used in an integrated system.

  1. AWork-in-Process Control A/c Dr. 80,000; Overhead Control A/c Dr. 12,000; To Stores Ledger Control A/c 92,000Correct
  2. BWork-in-Process Control A/c Dr. 92,000; To Stores Ledger Control A/c 92,000
  3. CStores Ledger Control A/c Dr. 92,000; To Work-in-Process Control A/c 80,000; To Overhead Control A/c 12,000
  4. DCost Ledger Control A/c Dr. 92,000; To Stores Ledger Control A/c 92,000

Explanation

Direct materials are charged to Work-in-Process and indirect materials to Overhead Control, with Stores Ledger Control credited for the total 92,000. Debiting WIP with the full amount wrongly treats indirect materials as direct. Option 3 reverses the direction. Cost Ledger Control is used only in non-integrated systems.

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