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CMA Intermediate · Cost Accounting · Cost Book-Keeping

Under non-integrated cost book-keeping, Sharma Components Ltd issued direct materials of Rs 1,20,000 and indirect materials of Rs 18,000 from stores to the factory. Which entry correctly records this issue in the cost ledgers?

Debit Work-in-Progress Control with Rs 1,20,000 and Overhead Control with Rs 18,000, and credit Stores Ledger Control with Rs 1,38,000. Direct materials go to production cost, while indirect materials are collected as overhead, and stores is credited with the total issued.

  1. ADr Work-in-Progress Control A/c Rs 1,38,000; Cr Stores Ledger Control A/c Rs 1,38,000
  2. BDr Work-in-Progress Control A/c Rs 1,20,000 and Dr Overhead Control A/c Rs 18,000; Cr Stores Ledger Control A/c Rs 1,38,000Correct
  3. CDr Stores Ledger Control A/c Rs 1,38,000; Cr Work-in-Progress Control A/c Rs 1,20,000 and Cr Overhead Control A/c Rs 18,000
  4. DDr Work-in-Progress Control A/c Rs 1,20,000 and Dr Cost Ledger Control A/c Rs 18,000; Cr Stores Ledger Control A/c Rs 1,38,000

Explanation

Direct materials are charged to WIP (Rs 1,20,000) and indirect materials to Overhead Control (Rs 18,000); the stores account is credited with the total Rs 1,38,000. Option A wrongly puts indirect materials into WIP. Option C reverses the direction. Option D debits the Cost Ledger Control account, which is for items from financial books.

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