PPT: Integral and Non-Integral Systems of Accounting | Cost and Management Accounting for CA Intermediate PDF Download

 Page 1


INTRODUCTION:
• Enterprises usually make a choice between formal and informal cost 
accounting. 
• Informal cost accounting system keeps cost records on the basis of 
memorandum statements and face limitations.
• So, Formal system of accounting is used In most of the concerns. 
• There are following two ways for maintaining cost books under formal cost 
accounting:
? 1. Cost and financial accounts kept separately and called non-
integrated system of cost accounting. 
? 2. Cost and financial accounts are kept mingled and called integrated 
system of cost accounting. 
Page 2


INTRODUCTION:
• Enterprises usually make a choice between formal and informal cost 
accounting. 
• Informal cost accounting system keeps cost records on the basis of 
memorandum statements and face limitations.
• So, Formal system of accounting is used In most of the concerns. 
• There are following two ways for maintaining cost books under formal cost 
accounting:
? 1. Cost and financial accounts kept separately and called non-
integrated system of cost accounting. 
? 2. Cost and financial accounts are kept mingled and called integrated 
system of cost accounting. 
Non-integraL SYSTEM:
? Non-integral system is a system of accounting under which two separate sets of 
account books are maintained —one for cost accounts and the other for financial 
accounts. 
? Since separate ledgers are maintained for cost and financial accounts in this 
system, the cost accountant is responsible for recording of the cost accounting 
transactions and the financial accountant is responsible for financial transactions.
? Non-integral system of accounting is also known as non-integrated system or 
Inter-locking system or Cost Ledger Accounting system.
? CIMA, London defines Non-integral system as a system in which the cost accounts 
are distinct from financial accounts, the two sets of accounts being kept 
continuously in agreement by the use of control accounts or made readily 
reconcilable by other means.
Page 3


INTRODUCTION:
• Enterprises usually make a choice between formal and informal cost 
accounting. 
• Informal cost accounting system keeps cost records on the basis of 
memorandum statements and face limitations.
• So, Formal system of accounting is used In most of the concerns. 
• There are following two ways for maintaining cost books under formal cost 
accounting:
? 1. Cost and financial accounts kept separately and called non-
integrated system of cost accounting. 
? 2. Cost and financial accounts are kept mingled and called integrated 
system of cost accounting. 
Non-integraL SYSTEM:
? Non-integral system is a system of accounting under which two separate sets of 
account books are maintained —one for cost accounts and the other for financial 
accounts. 
? Since separate ledgers are maintained for cost and financial accounts in this 
system, the cost accountant is responsible for recording of the cost accounting 
transactions and the financial accountant is responsible for financial transactions.
? Non-integral system of accounting is also known as non-integrated system or 
Inter-locking system or Cost Ledger Accounting system.
? CIMA, London defines Non-integral system as a system in which the cost accounts 
are distinct from financial accounts, the two sets of accounts being kept 
continuously in agreement by the use of control accounts or made readily 
reconcilable by other means.
KEY FEATURES OF NON-INTEGRAL :
? (i) Separate ledgers are maintained for cost and financial 
accounts.
? (ii) Like financial accounting, it is also based on double entry 
system.
? (iii) There are no personal accounts because cost accounts do 
not show relationship with outsiders.
? (iv) Cost accounts are concerned with impersonal accounts 
i.e., real and nominal accounts.
? (v) In real accounts, only stocks are shown in cost accounts.
Page 4


INTRODUCTION:
• Enterprises usually make a choice between formal and informal cost 
accounting. 
• Informal cost accounting system keeps cost records on the basis of 
memorandum statements and face limitations.
• So, Formal system of accounting is used In most of the concerns. 
• There are following two ways for maintaining cost books under formal cost 
accounting:
? 1. Cost and financial accounts kept separately and called non-
integrated system of cost accounting. 
? 2. Cost and financial accounts are kept mingled and called integrated 
system of cost accounting. 
Non-integraL SYSTEM:
? Non-integral system is a system of accounting under which two separate sets of 
account books are maintained —one for cost accounts and the other for financial 
accounts. 
? Since separate ledgers are maintained for cost and financial accounts in this 
system, the cost accountant is responsible for recording of the cost accounting 
transactions and the financial accountant is responsible for financial transactions.
? Non-integral system of accounting is also known as non-integrated system or 
Inter-locking system or Cost Ledger Accounting system.
? CIMA, London defines Non-integral system as a system in which the cost accounts 
are distinct from financial accounts, the two sets of accounts being kept 
continuously in agreement by the use of control accounts or made readily 
reconcilable by other means.
KEY FEATURES OF NON-INTEGRAL :
? (i) Separate ledgers are maintained for cost and financial 
accounts.
? (ii) Like financial accounting, it is also based on double entry 
system.
? (iii) There are no personal accounts because cost accounts do 
not show relationship with outsiders.
? (iv) Cost accounts are concerned with impersonal accounts 
i.e., real and nominal accounts.
? (v) In real accounts, only stocks are shown in cost accounts.
FEATURES CONTINUED... 
? (vi) Transactions affecting the nominal accounts are recorded 
separately in detail. Thus cost accounting department is concerned 
mainly with the ascertainment of income and expenditure of 
business,
? (vii) Under this system one main ledger (i.e., Cost Ledger) and 
various subsidiary ledgers are maintained,
? (viii) Since the system is not properly integrated, some items may 
appear in financial ledgers only, while some other items appear only 
in cost ledger,
? (ix) The profit or loss disclosed by the two sets of accounts for a 
particular period will never be the same and as such a reconciliation 
of costing profit or loss with that of financial accounts is essential.
Page 5


INTRODUCTION:
• Enterprises usually make a choice between formal and informal cost 
accounting. 
• Informal cost accounting system keeps cost records on the basis of 
memorandum statements and face limitations.
• So, Formal system of accounting is used In most of the concerns. 
• There are following two ways for maintaining cost books under formal cost 
accounting:
? 1. Cost and financial accounts kept separately and called non-
integrated system of cost accounting. 
? 2. Cost and financial accounts are kept mingled and called integrated 
system of cost accounting. 
Non-integraL SYSTEM:
? Non-integral system is a system of accounting under which two separate sets of 
account books are maintained —one for cost accounts and the other for financial 
accounts. 
? Since separate ledgers are maintained for cost and financial accounts in this 
system, the cost accountant is responsible for recording of the cost accounting 
transactions and the financial accountant is responsible for financial transactions.
? Non-integral system of accounting is also known as non-integrated system or 
Inter-locking system or Cost Ledger Accounting system.
? CIMA, London defines Non-integral system as a system in which the cost accounts 
are distinct from financial accounts, the two sets of accounts being kept 
continuously in agreement by the use of control accounts or made readily 
reconcilable by other means.
KEY FEATURES OF NON-INTEGRAL :
? (i) Separate ledgers are maintained for cost and financial 
accounts.
? (ii) Like financial accounting, it is also based on double entry 
system.
? (iii) There are no personal accounts because cost accounts do 
not show relationship with outsiders.
? (iv) Cost accounts are concerned with impersonal accounts 
i.e., real and nominal accounts.
? (v) In real accounts, only stocks are shown in cost accounts.
FEATURES CONTINUED... 
? (vi) Transactions affecting the nominal accounts are recorded 
separately in detail. Thus cost accounting department is concerned 
mainly with the ascertainment of income and expenditure of 
business,
? (vii) Under this system one main ledger (i.e., Cost Ledger) and 
various subsidiary ledgers are maintained,
? (viii) Since the system is not properly integrated, some items may 
appear in financial ledgers only, while some other items appear only 
in cost ledger,
? (ix) The profit or loss disclosed by the two sets of accounts for a 
particular period will never be the same and as such a reconciliation 
of costing profit or loss with that of financial accounts is essential.
LEDGERS UNDER NON INTEGRAL:
Basically two types of ledgers are maintained under NON-INTEGRAL
system:
? (a) The principal financial ledgers 
? (b) The principal cost ledgers. 
The Principal Financial ledgers are: 
? (i) General Ledger:
? It contains all real, nominal and personal accounts except trade debtors and trade creditors account.
? (ii) Debtors Ledger:
? It has personal accounts of trade debtors.
? (iii) Creditors Ledger:
? It has personal accounts of trade creditors.