Manufacturing Accounts

Question 1

What is cost bookkeeping?

Answer 1

Where all of the costing gets recorded in a set of accounts

Question 2

What are integrated accounts?

Answer 2

set of accounting records that integrates both financial and cost accounts

Question 3

What are the advantages of integrated accounts?

Answer 3

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

Question 4

What are a disadvantage of integrated accounts?

Answer 4

As they include financial accounts, the legal requirements to fulfill financial accounting standards may not be the best viewpoint from which to see cost and management accounts

Question 5

What are the 4 steps manufacturing accounts?

Answer 5

1. resources are obtained and paid for
2. resources are used in the production process (transfer resources to Work in progress (WIP)
3. products are completed and go to the warehouse (transfer items to Finished goods (FG)
4. Products are sold and their cost is compared to the revenue to establish the profit/loss (statement of profit/loss, cost of sales)

Question 6

What does debiting mean?

Answer 6

removing an amount of money from a bank account

Question 7

What ledgers should you create?

Answer 7

Each resource (ie labour, overheads, material/stores) gets its own table
Debiting the account goes to the left, cash goes to the right
When used in production they are transferred to the WIP account (on the left)
Then it is transferred to Finished goods accounts
Then create Statement of profit/loss

Question 8

What is a fvaourable variance/

Answer 8

credit to statement of profit or loss (increase profit)

Question 9

What is an adverse variance?

Answer 9

debit to the statement of profit/loss (decrease profit)

Question 10

For the materials/stores account, how is debit and credit seen?

Answer 10

material price variance: Favourable (debit, Adverse, credit)

Question 11

For the labour/wages control account, how is debit and credit seen?

Answer 11

Labour rate variance= favourable=debit, adverse=credit)

Question 12

For the Overhead control account, how is debit and credit seen?

Answer 12

Total overhead variance (under/over absorbed)
Over absorbed overhead= favourable is debit
Under absorbed overhead= adverse is credit

Question 13

For the work in progress account, how is debit and credit seen/

Answer 13

material usage variance (favourable=debit, adverse=credit)

Labour efficiency account (favourable= debit, adverse=credit)