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CA Intermediate · Cost and Management Accounting · Cost Accounting Systems

Under non-integrated accounting, Mehta Engineering purchases raw materials worth ₹6,00,000 on credit and issues ₹4,50,000 of materials to production. Which entry correctly records the issue in the cost books?

The issue of materials to production is recorded by debiting Work-in-Progress Control Account and crediting Stores Ledger Control Account for ₹4,50,000. Stores fall and production cost rises. The Cost Ledger Control Account is used only for transactions linking to financial books, such as purchases.

  1. AWork-in-Progress Control A/c Dr. 4,50,000 to Stores Ledger Control A/c 4,50,000Correct
  2. BStores Ledger Control A/c Dr. 4,50,000 to Work-in-Progress Control A/c 4,50,000
  3. CWork-in-Progress Control A/c Dr. 4,50,000 to Cost Ledger Control A/c 4,50,000
  4. DStores Ledger Control A/c Dr. 6,00,000 to Cost Ledger Control A/c 6,00,000

Explanation

Issue of direct materials debits Work-in-Progress Control and credits Stores Ledger Control, reducing stores. Option B reverses the entry. Option C credits the Cost Ledger Control A/c, which is used for items coming from financial books such as purchases, not internal issues. Option D records the purchase, not the issue.

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