In a non-integrated accounting system, financial accounting and cost accounting records are maintained separately. Below are examples of journal entries that might be recorded in such a system, focusing on the differences between the two sets of records.
Financial Accounting Journal Entries
- Purchasing Raw Materials (Financial Books)
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|
| 2024-06-01 | Raw Materials Inventory A/c | 100,000 | |
| | To Accounts Payable A/c | | 100,000 |
| | (Being raw materials purchased on credit) | | |
|
| | |
- Paying for Raw Materials (Financial Books)
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|
| 2024-06-10 | Accounts Payable A/c | 100,000 | |
| | To Cash/Bank A/c | | 100,000 |
| | (Being payment made for raw materials) | | |
| | |
|
- Sales on Credit (Financial Books)
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|
| 2024-06-15 | Accounts Receivable A/c | 150,000 | |
| | To Sales A/c | | 150,000 |
| | (Being goods sold on credit) | | |
| | |
|
Cost Accounting Journal Entries
- Issuing Raw Materials to Production (Cost Books)
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|
| 2024-06-20 | Work in Progress A/c | 80,000 | |
| | To Raw Materials Inventory A/c | | 80,000 |
| | (Being raw materials issued to production) | | |
| | |
|
- Recording Direct Labor (Cost Books)
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|
| 2024-06-25 | Work in Progress A/c | 40,000 | |
| | To Wages Payable A/c | | 40,000 |
| | (Being direct labor costs allocated) | | |
| | |
|
- Recording Manufacturing Overheads (Cost Books)
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|
| 2024-06-30 | Work in Progress A/c | 20,000 | |
| | To Manufacturing Overhead A/c | | 20,000 |
| | (Being manufacturing overhead allocated) | | |
| | |
|
Reconciliation Between Financial and Cost Accounts
To ensure the financial and cost accounts reconcile, adjustments are often needed:
- Adjusting Entries for Over/Under Absorption of Overheads
If overheads are over-absorbed (actual overheads are less than absorbed overheads):
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|
| 2024-07-05 | Manufacturing Overhead A/c | 5,000 | |
| | To Costing Profit and Loss A/c | | 5,000 |
| | (Being adjustment for over-absorbed overheads) | | |
| | |
|
If overheads are under-absorbed (actual overheads are more than absorbed overheads):
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|
| 2024-07-05 | Costing Profit and Loss A/c | 7,000 | |
| | To Manufacturing Overhead A/c | | 7,000 |
| | (Being adjustment for under-absorbed overheads) | | |
| | |
|
These examples illustrate how entries are made in both financial and cost books and highlight the need for periodic reconciliation to ensure accuracy and consistency in the records.
