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CMA Intermediate · Cost Accounting · Cost Book-Keeping

Mehta Industries uses an integral system. Wages paid for the month were Rs 3,50,000. Of this, Rs 3,00,000 is direct wages and Rs 50,000 is indirect wages. Which entry is correct for the allocation of wages?

Direct wages of Rs 3,00,000 are debited to Work-in-Progress Control Account and indirect wages of Rs 50,000 to Factory Overhead Control Account, with Wages Control Account credited Rs 3,50,000. Indirect labour must not go to WIP, and integral systems do not use a Cost Ledger Control Account.

  1. AWork-in-Progress Control A/c Dr 3,50,000 to Wages Control A/c 3,50,000
  2. BWork-in-Progress Control A/c Dr 3,00,000 and Factory Overhead Control A/c Dr 50,000 to Wages Control A/c 3,50,000Correct
  3. CWages Control A/c Dr 3,50,000 to Work-in-Progress Control A/c 3,00,000 and Factory Overhead Control A/c 50,000
  4. DCost Ledger Control A/c Dr 3,50,000 to Wages Control A/c 3,50,000

Explanation

Direct wages are charged to Work-in-Progress (3,00,000) and indirect wages to Factory Overhead Control (50,000), with Wages Control credited for the total 3,50,000. Option A wrongly charges indirect wages to WIP. Option C reverses the entry, and option D uses a contra account that is not used in an integral system.

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