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CMA Intermediate · Cost Accounting · Cost Book-Keeping

In the cost ledger, wages paid are Rs 1,20,000, of which direct wages are Rs 90,000 and indirect wages are Rs 30,000. Which entry correctly records the allocation of this wages cost after payment has been debited to Wages Control Account?

Debit Work-in-Progress Control Rs 90,000 and Overhead Control Rs 30,000, and credit Wages Control Rs 1,20,000. Direct wages go into production cost while indirect wages are collected as overhead, clearing the Wages Control Account.

  1. ADebit Work-in-Progress Control Rs 90,000 and Overhead Control Rs 30,000; credit Wages Control Rs 1,20,000Correct
  2. BDebit Work-in-Progress Control Rs 1,20,000; credit Wages Control Rs 1,20,000
  3. CDebit Wages Control Rs 1,20,000; credit Work-in-Progress Control Rs 90,000 and Overhead Control Rs 30,000
  4. DDebit Overhead Control Rs 90,000 and Work-in-Progress Control Rs 30,000; credit Wages Control Rs 1,20,000

Explanation

Direct wages are charged to Work-in-Progress Control and indirect wages to Overhead Control, with Wages Control credited for the total. Charging all to WIP overstates product cost. The reversed options swap the sides or the heads.

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