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CA Intermediate · Cost and Management Accounting · Cost Accounting Systems

Kapoor Industries uses non-integrated accounts. Cost ledger balances at start: Stores ₹50,000; WIP ₹80,000; Finished goods ₹60,000. During the month: materials purchased ₹3,00,000; materials issued to production ₹2,60,000; wages charged to WIP ₹1,20,000; factory overheads absorbed ₹90,000; cost of goods completed ₹4,40,000. What is the closing balance of WIP?

Closing WIP is ₹1,10,000. Add opening WIP ₹80,000, materials issued ₹2,60,000, wages ₹1,20,000 and absorbed overheads ₹90,000 to get ₹5,50,000, then deduct completed goods ₹4,40,000. Purchases are not used because only issues enter WIP.

  1. A₹1,10,000Correct
  2. B₹1,50,000
  3. C₹2,50,000
  4. D₹1,90,000

Explanation

Closing WIP = opening 80,000 + materials 2,60,000 + wages 1,20,000 + overheads absorbed 90,000 − goods completed 4,40,000 = 5,50,000 − 4,40,000 = 1,10,000. Using purchases of 3,00,000 instead of issues would give 1,50,000 wrongly, which is the main trap.

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