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CA Intermediate · Cost and Management Accounting · Cost Accounting Systems

Under non-integrated accounting, which ledger account is called the 'Cost Ledger Control Account' and is used to complete the double entry in the cost books for items originating in financial accounts?

The Cost Ledger Control Account is the contra account that makes the cost ledger self-balancing. Items such as purchases, wages and expenses come from financial accounts, so the control account takes the opposite entry, allowing the cost books to balance on their own without involving financial ledger accounts.

  1. AIt is a personal account of the proprietor in the financial ledger
  2. BIt is a real account recording only fixed assets of the factory
  3. CIt is the account that serves as the contra for all cost ledger entries, making the cost ledger self-balancingCorrect
  4. DIt is a nominal account that shows the profit of the period

Explanation

In a cost ledger kept on a self-balancing basis, the Cost Ledger Control (General Ledger Adjustment) Account is used to provide the other side of every entry, such as receipts, payments and costs, so that the cost ledger balances independently. It is not a profit account or a fixed asset account.

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