Process Costing

Process costing is famous topic of cost accounting. It is that method of costing which is used at that industry where production is done in step by step process. Every finished goods of one process will be the raw material of other process and production is continually operating in factory. At that time we calculate first process cost by making process account. A process account is made for every process of production.

For example

There are three process for manufacturing of biscuits it means we will make three process accounts for this. First process account's raw material cost, labor cost, direct expenses and overheads total will be credited by second process account. In other words, we will credit process second Account in process first account. Total cost of first process will bring in the debit side and other new raw material cost and other cost will be added in debit side. After making second process account, its total will also transfer to second process account and In final and third process account's total will transfer to finished stock account.

Following are main industries where we use process costing method:

1. Chemical industry
2. Soap industry
3. Clothes industry
4. Paper industry
5. Dairy Industry

In process costing, we study mainly following important matters

1. Process Loss

It is sure that some losses will happen in processing industries. These losses may be happened due to natural activities of chemical or leakage. So, for effective control, it is necessary to record all the raw materials in each process. Normal process loss will increase the cost of unit produced in any process. So, we will credited normal wastage units only (not amount) in the credit side of process account.

If there is abnormal loss which has happened due to ignorance, then we calculate value of abnormal loss and its no. of units and cost will be credited to process account.

Formula of calculating the Value of Abnormal Loss



If there is any cash received due to selling of scrap, then this will be credited to abnormal loss account and balance of abnormal loss account will be credited to costing profit and loss account. 

2. Inter - Process Profits

If transfer from one process to another process is not on cost, then to calculate of inter - process profits is very important because we will show it in process account's separated column.

With this, next process will not get benefit of previous process. This inter-process profits do not show in balance sheet. It is just for deep analysis in process accounting.

{* One important thing, you must remember that you have to deduct closing stock's profit from total profit earned in any process.}

This profit on closing stock can be calculated with following formula :

COMMENTS

Comments on this Website
.
Share above Content to Your Friends



Name

access account accountant Accounting accounting definitions accounting ebook Accounting education accounting procedure accounting process outsourcing Accounting Software advance advertising africa Amalgamation amendments announcements Annuity assets audit auditing Australia B.Com. balance sheet bank Bank reconciliation banking basic accounting BBA benefits best bill black money blog bloggers book keeping bookkeeping Branch Accounting - full tutorial budget Budget variance business businessman CA calculator canada capital capital budgeting career cash cash book cash flow statement Chiense children china class coaching coins college commerce commerce students company computer computer accounting conference Contact vinod kumar corporate accounting cost cost accounting cost center cost centre CPA credit credit card cs currency data Debit and credit debit cards debt debtor degree depletion depreciation documents dollar domain Downloads Dubai e-accounting earning education Education Loans email employee EPF ERP euromoney examination excel excise duty expenses facebook factor of loan fans feature fifo FII fiji finacle finance Financial financial accounting fire insurance flickr flow forensic forex formula france fraud free fun function fund GAAP GDP gdr germany gold goodwill goodwill accounting google google apps google apps google base google buzz google calendar Google docs google finance google fusion tables google talk govt. GST guide health Hindi Hindi Language history holding company How to treat FBT in Tally 9 HRA ICAI ICAWI ICICI Bank IFRS income income statement Income Tax India indian railway Indonesia inflation inflation accounting infographics information inspiration insurance insurance accounting interest international Internet Introduction of Tally 9 inventory investment invoice IT Japan Job costing journal entries Kalculate keyboard kindle kuwait laptop law LBT learning lease lecture ledger leducation Leverage Analysis liabilities lifo linkedin loan logical point loss loss of profit M.Com. m.phil malaysia management accounting manual accounting manufacturing account market marketing mastercard material MBA MCA media migration mobile money ms word ms. excel multi currency in tally 9 Multicurrency Accounting mutual fund national security new and sacrifice ratio new york times new zealand news NGO nonprofit-accounting North Georgia Mountains NPV NSE odbc office oman online application online accounting otcei pakistan parents pay pal pdf pie chart pie chart of income pnb podcast ppf presentation price privacy policy prize money prof. vinod kumar profit profit and loss account project management provision purchase puzzles quickbooks Quote quotes quotes of svtuition rating agency ratio analysis RBI readers real estate rectification of errors remote control reports reserves responsibility accounting retirement revenue Revenue reserves review risk rupees salary sale saudi arabia saving sbi scholarship school SEBI security service tax share share trading Shares shri lanka singapore sms social accounting society solution South Africa stock stock exchange structure student students study subsidiary company svtuition swiss bank tally tally 9 Tally 7.2 Tally 9 Tally.ERP 9 tanzania tax Tax Accounting TDS teacher teaching technology test testimonial testimonials thailand tips trading trading on equity transaction trend trial balance tuition twitter UAE UGC - NET Commerce UK United Arab Emirates university usa valuation VAT Video Voucher and vouching wikipedia working capital youtube
false
ltr
item
Accounting Education: Process Costing
Process Costing
http://2.bp.blogspot.com/_DJEIRrK4tl4/TOJ_kuNUQbI/AAAAAAAAGHs/Vn7a7ji3pT4/s640/abnormal+loss.PNG
http://2.bp.blogspot.com/_DJEIRrK4tl4/TOJ_kuNUQbI/AAAAAAAAGHs/Vn7a7ji3pT4/s72-c/abnormal+loss.PNG
Accounting Education
http://www.svtuition.org/2010/11/process-costing.html
http://www.svtuition.org/
http://www.svtuition.org/
http://www.svtuition.org/2010/11/process-costing.html
true
2410664366776677676
UTF-8
Not found any lecture VIEW ALL Readmore Reply Cancel reply Delete By Home PAGES Lectures View All RECOMMENDED FOR YOU Category ARCHIVE SEARCH ALL Lectures Not found any lecture match with your request, please help to write it and send it to our email at vinod@svtuition.org for making this website free accounting and finance encyclopedia. Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock