When we keep our financial and cost accounts separately, we have to reconcile the both accounts. For saving reconciliation time, we have to keep integral accounts which fulfill the need of financial accounting and cost accounting. System of keeping accounts this way is called integral system of accounting. All transactions which are relating to cost accounting and financial accounting are self balanced through integral account.
Advantages of Integral System Accounting
1. There is no need of making reconciliation statement for matching the profits as per financial accounting and as per cost accounting.
2. There is no need of keeping duplicate records.
3. Both cost and finance department can work together for promotion of business under this system of accounting.
Essential Features of Integral System Accounting
1. We record the transactions relating to warehouse in store control account. This account will be debited with the purchase of raw material and credited with payment of cash or creditor account.
2. We also open wage control account which is debited with wage control account and and credited with the cash or bank account when we pay the wages.
3. We also open the production overhead control account in which we keep the accounts of indirect material, indirect labour cost and other production overheads.
4. We also open the administration overheads control account in which keep the expenses relating to administration.
5. We also open the selling and distribution overhead account in which we keep the expenses relating to selling.
6. Store control account, wages control account and production overhead control account will be transferred to work in process account.
7. Work in process account will be transferred to Finished goods account.
8. The stock which is sold will be transfer to cost of goods sold account. Sales and distribution overhead account also transfer to cost of goods sold account.
9. Cost of goods sold account's debit side, we will show 8 point's account and its credit side, we will show the debtor account. Different of this account will be transfer to Costing Profit and loss account.
10. Now, in the costing profit and loss account, we compare the balance of cost of sale account and administration overhead control account and difference between this will be transfer to profit and loss account.
Related : Installation of costing system
Advantages of Integral System Accounting
1. There is no need of making reconciliation statement for matching the profits as per financial accounting and as per cost accounting.
2. There is no need of keeping duplicate records.
3. Both cost and finance department can work together for promotion of business under this system of accounting.
Essential Features of Integral System Accounting
1. We record the transactions relating to warehouse in store control account. This account will be debited with the purchase of raw material and credited with payment of cash or creditor account.
2. We also open wage control account which is debited with wage control account and and credited with the cash or bank account when we pay the wages.
3. We also open the production overhead control account in which we keep the accounts of indirect material, indirect labour cost and other production overheads.
4. We also open the administration overheads control account in which keep the expenses relating to administration.
5. We also open the selling and distribution overhead account in which we keep the expenses relating to selling.
6. Store control account, wages control account and production overhead control account will be transferred to work in process account.
7. Work in process account will be transferred to Finished goods account.
8. The stock which is sold will be transfer to cost of goods sold account. Sales and distribution overhead account also transfer to cost of goods sold account.
9. Cost of goods sold account's debit side, we will show 8 point's account and its credit side, we will show the debtor account. Different of this account will be transfer to Costing Profit and loss account.
10. Now, in the costing profit and loss account, we compare the balance of cost of sale account and administration overhead control account and difference between this will be transfer to profit and loss account.
Related : Installation of costing system
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