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CMA Intermediate · Cost Accounting · Cost Book-Keeping

In Iyer Foods Ltd's non-integrated cost books, wages paid for the period were Rs 2,00,000. Of this, Rs 1,60,000 is direct labour and Rs 40,000 is indirect labour. Which pair of entries correctly records the wages in the cost ledgers?

Wages Control is debited and Cost Ledger Control credited for Rs 2,00,000. Then Wages Control is credited, with WIP Control debited Rs 1,60,000 for direct labour and Overhead Control debited Rs 40,000 for indirect labour, so indirect wages are collected as overhead.

  1. ADr Wages Control A/c 2,00,000; Cr Cost Ledger Control A/c 2,00,000, then Dr WIP Control 1,60,000 and Dr Overhead Control 40,000; Cr Wages Control 2,00,000Correct
  2. BDr Wages Control A/c 2,00,000; Cr Costing P&L A/c 2,00,000, then Dr WIP Control 2,00,000; Cr Wages Control 2,00,000
  3. CDr Cost Ledger Control A/c 2,00,000; Cr Wages Control A/c 2,00,000, then Dr WIP Control 1,60,000 and Dr Overhead Control 40,000; Cr Wages Control 2,00,000
  4. DDr Wages Control A/c 2,00,000; Cr Cost Ledger Control A/c 2,00,000, then Dr WIP Control 1,60,000 and Dr Costing P&L A/c 40,000; Cr Wages Control 2,00,000

Explanation

Wages paid are debited to Wages Control with credit to Cost Ledger Control (the link with financial books). The wages are then allocated: direct to WIP (1,60,000) and indirect to Overhead Control (40,000). Option C reverses the first entry; option D sends indirect wages straight to Costing P&L, bypassing overheads.

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