13. Manufacturing Accounts

Question 1

What are integrated accounts?

Answer 1

A set of accounting records that integrates both financial and cost accounts using a common input data for all accounting purposes

Question 2

What are the advantages of integrated accounts?

Answer 2

The effort required to prepare a second set of accounts is avoided and there is no need to reconcile the two sets of accounts

Question 3

What are the disadvantages of integrated accounts?

Answer 3

The need to prepare information that enables the business to fulfil statutory financial accounts requirements may influence what information is available and the way the information is presented, which may not be the best for management accounts

Question 4

What journey do resources take through a set of accounts?

Answer 4

1. Resources are paid for
2. Resources are used in production, so become part of Work in Progress
3. Products are completed and go to Finished Goods
4. Products are sold and their cost is transferred to the P&L

Question 5

How does a materials price variance appear on the materials ledger account?

Answer 5

Favourable = debit, Adverse = credit

Question 6

How does a labour rate variance appear on the wages control ledger account?

Answer 6

Favourable = debit, Adverse = credit

Question 7

How does an over-absorbed overheads variance show on the overhead control account?

Answer 7

Debit

Question 8

How does an under-absorbed overheads variance show on the overhead control account?

Answer 8

Credit

Question 9

How does a materials usage variance appear on the Work in Progress account?

Answer 9

Favourable = debit, Adverse = credit

Question 10

How does a labour efficiency variance appear on the Work in Progress account?

Answer 10

Favourable - debit, Adverse = credot

Question 11

What do the variance accounts contain?

Answer 11

The opposite of the variance in the individual ledger accounts