Chapter 4 - Accounting

Question 1

Whats the difference between an integrated cost accounting system and an interlocking cost accounting system?

Answer 1

1. Integrated cost accounting system – a system in which the cost and financial accounts are combined in one set of accounts.
2. Interlocking cost accounting system - an alternative system, where the cost and financial accounts are maintained independently

Question 2

Whats the stores ledger account?

Answer 2

Stores ledger account:a record of the quantity and value of each individual item of material stored by the organization

Question 3

Whats the stores requisition?

Answer 3

Stores requisition: the formal authorization for the issue of materials. Also contains details of the job number, product code or overhead account for which the materials are required.

Question 4

Whats a control account?

Answer 4

A control account is a summary account, where entries are made from totals of transactions for a period.A system of control accounts enables one to check the accuracy of the various accounting entries, since the total of all the individual entries in the various stores ledger accounts should agree with the control account, which will have received the totals of the various transactions.

Question 5

What is payroll accounting?

Answer 5

Payroll accounting: calculation of payments to be made to employees, government, pension funds, etc.

Question 6

What is labour cost accounting?

Answer 6

Allocation of labour costs to jobs, overhead account and capital accounts

Question 7

What is the accounting procedure for manufacturing overheads?

Answer 7

Accounting for manufacturing overheads involves entering details of the actual amount of manufacturing overhead incurred on the debit side of the factory overhead control account. The total amount of overheads charged to production is recorded on the credit side of the factory overhead account.

Question 8

What is the accounting procedure for non-manufacturing overheads?

Answer 8

Non-manufacturing overhead costs are regarded as period costs and not product costs, and non-manufacturing overheads are not therefore charged to the work in progress control account.

Question 9

What is the accounting procedure for jobs completed and products sold?

Answer 9

When jobs have been completed, they are transferred from the factory floor to the finished goods store. The total of the job accounts for the completed jobs for the period is recorded as a transfer from the work in progress control account to the finished goods inventory account.