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CMA Intermediate · Cost Accounting · Cost Book-Keeping

Under non-integrated cost accounts, Sharma Engineering issued materials worth Rs 80,000 from stores, of which Rs 70,000 was direct and Rs 10,000 indirect. What is the correct entry?

Debit Work-in-Progress Control with Rs 70,000 for direct material and Factory Overhead Control with Rs 10,000 for indirect material, and credit Stores Ledger Control with Rs 80,000. Direct items are charged to production, while indirect items are collected in overhead for later absorption.

  1. AWork-in-Progress Control A/c Dr 70,000; Factory Overhead Control A/c Dr 10,000; To Stores Ledger Control A/c 80,000Correct
  2. BWork-in-Progress Control A/c Dr 80,000; To Stores Ledger Control A/c 80,000
  3. CStores Ledger Control A/c Dr 80,000; To Work-in-Progress Control A/c 70,000; To Factory Overhead Control A/c 10,000
  4. DWork-in-Progress Control A/c Dr 70,000; Cost Ledger Control A/c Dr 10,000; To Stores Ledger Control A/c 80,000

Explanation

Direct materials go to WIP and indirect materials to the Factory Overhead Control account, with credit to Stores Ledger Control for the total of Rs 80,000. Option B wrongly treats indirect material as direct. Option C reverses the entry.

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