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CMA Intermediate · Cost Accounting · Integrated Accounting System

Under an integrated system, Meera Foods sold goods on credit for Rs 9,00,000, the cost of which was Rs 7,20,000. Selling and distribution overheads of Rs 40,000 were incurred and charged to cost of sales. Which set of entries correctly records the sale and the cost of sales, excluding the overhead?

Record the sale at selling price by debiting Debtors and crediting Sales Rs 9,00,000, and record its cost by debiting Cost of Sales and crediting Finished Goods Control Rs 7,20,000. Stock leaves at cost, revenue is booked at price.

  1. ADr Debtors 9,00,000 Cr Sales 9,00,000; Dr Cost of Sales 7,20,000 Cr Finished Goods Control 7,20,000Correct
  2. BDr Debtors 9,00,000 Cr Finished Goods Control 9,00,000; Dr Cost of Sales 7,20,000 Cr Sales 7,20,000
  3. CDr Sales 9,00,000 Cr Debtors 9,00,000; Dr Finished Goods Control 7,20,000 Cr Cost of Sales 7,20,000
  4. DDr Debtors 7,20,000 Cr Sales 7,20,000; Dr Cost of Sales 9,00,000 Cr Finished Goods Control 9,00,000

Explanation

Sales are recorded at selling price by debiting Debtors and crediting Sales. Cost of the goods sold is moved at cost by debiting Cost of Sales and crediting Finished Goods Control. Option B mixes selling price with stock and cost with sales.

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