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Process Costing 
Page 2


Process Costing 
Introduction 
? Process costing is a special BRANCH of costing used by 
the manufacturing industries.
? Who are involved in converting the RAW MATERIAL 
into the FINISHED PRODUCT.
? Such work of conversation is done step by step , each 
step called “a process” .
? Process costing is a method of allocating manufacturing 
cost to products to determine an average cost per unit.
Page 3


Process Costing 
Introduction 
? Process costing is a special BRANCH of costing used by 
the manufacturing industries.
? Who are involved in converting the RAW MATERIAL 
into the FINISHED PRODUCT.
? Such work of conversation is done step by step , each 
step called “a process” .
? Process costing is a method of allocating manufacturing 
cost to products to determine an average cost per unit.
Overview of Process Costing Systems
Page 4


Process Costing 
Introduction 
? Process costing is a special BRANCH of costing used by 
the manufacturing industries.
? Who are involved in converting the RAW MATERIAL 
into the FINISHED PRODUCT.
? Such work of conversation is done step by step , each 
step called “a process” .
? Process costing is a method of allocating manufacturing 
cost to products to determine an average cost per unit.
Overview of Process Costing Systems
Features of process costing
? A separate process account is prepared for each process.
? Where all Inputs and Expenses are recorded in the DEBIT 
SIDE and Losses and output are CREDITED.
? The output of one process becomes the input of the next 
process and so on until the finished product is obtained. 
? When the goods are sold, the amount will be transferred to 
the cost of goods sold account .
? When the goods are completed, they will be transferred to 
finished goods account.
Page 5


Process Costing 
Introduction 
? Process costing is a special BRANCH of costing used by 
the manufacturing industries.
? Who are involved in converting the RAW MATERIAL 
into the FINISHED PRODUCT.
? Such work of conversation is done step by step , each 
step called “a process” .
? Process costing is a method of allocating manufacturing 
cost to products to determine an average cost per unit.
Overview of Process Costing Systems
Features of process costing
? A separate process account is prepared for each process.
? Where all Inputs and Expenses are recorded in the DEBIT 
SIDE and Losses and output are CREDITED.
? The output of one process becomes the input of the next 
process and so on until the finished product is obtained. 
? When the goods are sold, the amount will be transferred to 
the cost of goods sold account .
? When the goods are completed, they will be transferred to 
finished goods account.
Accounting For Losses and Gains In Process 
Costing
?Nature of losses
? Normal loss
? Abnormal loss 
?Nature of Gain
? Abnormal Gain
Input units X
(-)Normal Loss X
Expected Output X
(-)Actual output X
Abnormal Loss + X
Input units X
(-)Normal Loss X
Expected Output X
(-)Actual output X
Abnormal Gain -X
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106 videos|173 docs|18 tests

FAQs on PPT - Process Costing - Cost Accounting - B Com

1. What is process costing in B Com?
Ans. Process costing is a method used to determine the cost of producing a product or service in a continuous production process. It is commonly used in industries where products go through multiple stages of production, such as manufacturing or chemical industries. B Com refers to Bachelor of Commerce, and process costing is a relevant topic in the field of accounting and finance.
2. How is process costing different from job costing?
Ans. Process costing and job costing are two different methods used to calculate the cost of production. While process costing is used for continuous production processes, job costing is used for customized or unique products or services. Process costing averages the cost across all units produced, whereas job costing assigns costs to specific jobs or projects.
3. What are the advantages of using process costing in business?
Ans. Some advantages of using process costing in business include: - Easy calculation of average costs: Process costing allows businesses to calculate the average cost per unit easily, which simplifies cost analysis and decision-making. - Efficient resource allocation: By analyzing costs at each stage of the production process, businesses can identify areas where resources are being underutilized or wasted, leading to more efficient resource allocation. - Standardization: Process costing promotes standardization and consistency in the production process, making it easier to evaluate performance and implement quality control measures.
4. How does process costing handle the costs of spoiled or defective units?
Ans. In process costing, the costs of spoiled or defective units are generally allocated to the good units produced. These costs are spread across all units, including the spoiled or defective ones, using the average cost per unit. This approach ensures that the costs of spoiled or defective units are absorbed by the overall production cost, rather than being assigned solely to the spoiled units.
5. Can process costing be used in service industries?
Ans. Yes, process costing can be used in service industries as well. While it is commonly associated with manufacturing industries, process costing can be adapted to calculate the cost of providing services. For example, in a restaurant, the cost of food ingredients and the labor required to prepare the dishes can be allocated to each unit of service provided using process costing principles.
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