Costing Bookkeeping Integrated System - Cost Book Keeping, Cost Accounting Video Lecture | Cost Accounting - B Com

welcome to an introduction to managerial
accounting brought to you by Park Bench
tutors you can find us on Facebook in
this short podcast we're going to take a
look at an aspect of costing known as
cost bookkeeping and we're going to look
at what used to be called the integrated
system
bookkeeping for financial accounting
records the transactions for the
business as a whole and this is what you
have met so far bookkeeping for cost
accounting has a different purpose
in other words we're looking at revenue
and costs that can be attributed to
products and activities and we then have
to reconcile the cost system accounts to
the financial accounting system and this
can be done in one of two ways cost
accounts are not concerned with drawings
or capital or reserves or with assets
other than inventory but they do affect
raw materials work in progress and
finished goods so we get the data for
cost accounts from the income accounts
and the expenditure counts and of course
there is an objective to all this and
that is to charge the costs to the end
products either directly through jobs or
indirectly using absorption systems so
remember then that cost accounts are not
going to be affected by the receipts
from trade receivables or payments to
trade payables or to discounts or sales
or purchases of fixed assets or
dividends or shares their concern mainly
with the income and expenditure there
are two systems that are in use the
integrated system and the interlocking
system the integrating system is where
all the information for financial and
costing is kept in a single set of books
and that's what this podcast we'll be
looking at there is our second method
called the interlocking system and
that's where the books are divided into
a financial ledger and the cost ledger
and those will be looked at in our next
podcast so here's an example and we're
going to use this example for the
integrated system and for the
interlocking system we have an
engineering company we
is providing packaging solutions and we
have information relating to the trial
balance and the income statement for the
training year so when we go through this
you find that what we're basically doing
really is reconstructing accounts rather
than actually entering data in the order
that it would normally put in - it may
be easier to follow this almost sort of
slide by slide in which case of you
visit Park Bench cheaters.com
there is a flash video for that purpose
so we have the trial balance and at the
start of the year that will simply
contain information about assets
accumulated depreciation cash and any
reserves and shares so we've got very
simple trial balance there that's for
the start of the year and we have the
income statement at the end of the year
and this is what's happened during the
air and you can see as the profit made
of fifty four thousand five hundred and
what we're going to try and show you is
how you would have derived that figure
from cost accounting you do need a
little bit of information which is
additional to that that's the method of
absorption which is 45 percent of direct
labor - for fixed overheads
therefore you also need to know other
things such as the hours of labor and of
course depreciation you need to know and
how many units what the sale price was
so the first step then we're going to
transfer the balances from the opening
trial balance as account entries so we
have ordinary shares credit - fifteen
hundred and fifty thousand we have
reserves credit of 25,000 we have fixed
assets 167,000 added to it we have
accumulated depreciation and we have the
cash account and those will all balance
that's our trial balance so all we've
done is entered the trial balance now
into
the financial accounting system as we
normally would have we're now going to
update the double-entry for depreciation
that's taken place during the year so we
are going to credit accumulated
depreciation with 4,000 and of course
we've got to debit in a depreciation
expense with 4,000 now we can make
entries to the materials purchased began
to assume that all the materials
purchased to being paid for during the
year so that's our materials purchased
debit of 40,000 and that will be a
credit to payables but we've said that
these have all been paid so there will
be a debit to payable and a credit to
cash and that accounts for our materials
purchased now we're going to enter
similar details for sales made assuming
that all the receivables were received
in the words but all those who owed us
money paid us money so we start the
crediting the sales we would have
debited receivables but then to receive
the monies we would have credited
receivables and debited the cash account
right now let's look at the expenses
that were incurred we incurred rent so
we debit rent and credit the cash
account we have a manager's salary we
would debit them the manager salary
account credit the cash we would debit
the wages and credit cash we would debit
variable overhead and credit cash so
those are all our expenses and you can
see I've laid them all out there and
highlighted all the credits now in the
cash account ok now we have all the
information there let's start to
determine the fixed overheads I'm going
to do this by transferring from the
accounts for double entry so I get to
transfer to fixed overhead the rent the
salary and the depreciation
we are I've transferred the rent credit
the rent daily fixed overhead transfer
the manager's salary credit the manager
salary debit fixed overhead and
depreciation credit depreciation debit
the fixed overhead now I need to
transfer costs to work in progress
so if I look at the right up to the
variable overhead I need to transfer
that by crediting the favor overhead I
will credit wages and I will credit
materials purchased and of course I need
to debit all those to the
work-in-progress
account that's all those double entries
now if I look at the fixed overheads
right that's all gone to work in
progress two thousand five hundred six
thousand four thousand
yeah yeah
note that I've absorbed fixed overhead
here at a particular rate namely at a
rate of 45% for direct labor in other
words 25% two and a half thousand you
also noticed by the way that the fixed
overhead account doesn't actually
balance at the moment we'll come back to
that in a minute but the transfer my
work-in-progress to finish goods and
then the finished goods to cost in sales
so there's my work in progress that all
becomes finished goods rally of eighty
eight thousand two hundred and fifty
which I transferred to finish goods and
then you can see I'm going to transfer
those to cost of sales and there we are
they're all transferred to cost of sales
now now I've got to compile the profit
and loss account and eventually of
course I will have to transfer the
profit to leave reserves so I start off
with the sales which have got to go to
the profit and loss account so I
previously credited the sales four
hundred and forty four thousand so I'm
going to debit the sales for the same
amount and obviously credit the P&L
account with fixed overheads note that
I'm now going to come back and balance
that account because I've got a figure
of twelve hundred and fifty which is
needed to balance and that of course
represents under absorption of the fixed
overhead so that under absorption of
1250 which is required to bounce it will
have to go to the profit and loss
account and for the cost of sales we had
eighty eight 250 so I'm going to credit
that and debit PayPal account so there
we are I've got those three figures in
now I've got cost of sales I've got the
under absorption figure and I've got the
sales but of course the two figures
don't balance at the moment the reason
being that I haven't entered a figure
for profit
in order to make them balance I need to
have a figure of fifty four thousand
five hundred and that of course
represents my profit so I transfer that
to the reserves I debit the profit and
loss account and I credit the reserves
account so my reserves I had a brought
forward figure of twenty five thousand
and I just increased it at the end of
the year by fifty four thousand five
hundred for the profit I can check all
of this by saying that okay all the
accounts that don't have zero balances
I've entered anything it has a zero
balance I've ignored so I have balances
in chairs reserves in assets
depreciation in cash and if I add those
up you will see that those are balanced
so if I'd done a trial balance at the
end of the year that's the information
that I would have had that ends this
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