Question bank

Cost accounting
Brief questions

Enumerate 10 items of reconciliation between financial statement and cost records.

Explain the advantage and disadvantage of process costing
Explain the significance of process costing
Distinguish between work certified and work uncertified.
What is Cost accounting? What are the objectives of cost accounting.?
Distinguish between Cost accounting and Financial accounting

short notes

Cause classification based on nature of production:

Sub Contract
Abnormal loss
Direct Cost
Contract Costing
Indirect cost
Normal loss
Process cost
Variable cost
Contract price

Practical

1.The following data have been extracted from the books of Shri Ganesh Industries Ltd. for the your 2017
Particulars ₹
Opening Stock of Raw Materials 25,000
Purchases of Raw Materials 85.000
Closing Stock of Raw Material 40.000
Carriage Inwards 5.000
Wages (Direct) 75,000
Wages (Indirect) 10,000
Other Direct Charges 15.000
Rent and Rates: Factory 5,000
office 500
Indirect Consumption of Material 500
Depreciation on Plant 1,500
Depreciation on Office Furniture 100
Salary: Office 2.500
Salesman 2000
Other Factory Expenses 5700
Other Office Expenses 900
Managing Director's Remuneration 12000
Other Selling Expenses 1000
Travelling Expenses of Salesman 1100
Carriage Outwards 1000
Sales 250000
Advance Income Tax Paid 15000
Advertisement 2000
The Managing Director's Remuneration is to be allocated₹4,000 to factory, 2,000 to the office and 6,000 to
selling departments. From the above information prepare a statement of cost.

2. Following details of furnish by Sai limited of expenses incurred during the year ended 31st March 2018.
Particulars Amount (₹)
Purchase of raw materials 480000
Direct wages 220000
Factory rent 70000
Cost of catalogue 34200
Depreciation on plantain machinery 38000
Cost of plant and machinery purchase 250000
Opening stock of raw material 50000
Office furniture 25000
Carriage outward 26600
Interest on loan 12000
Closing stock of raw material 30000
loss on sale of furniture 10000
Office salary 55000
Store keeper salary 18000
Depreciation of office equipment 20000
Cost of pattern 180000
Material handling charges 10000

Other information;
1.Stock of Finish goods at the end of the year was 1000 units to be valued at cost of production.
2.Number of units produced during the year were 20000
3.Profit desire on sales is 20%
Prepare cost sheet showing the various elements of cost both in total and per unit and also find out total
profit and per unit profit.

3. Following particulars are revealed from the costing records of Mis Jupiter & Co. Ltd. in the year 2014.
Production, :15,000 Units
Particulars ₹
Raw Material Cost 300000
Labour Cost 1,80,000
Factory Overheads 1,20,000
Office Overheads 60,000
Selling Expenses 15,000

Rate of profit 25% on selling price.

Now the management decided to produce 20,000 units in 2015.
As per Co.'s estimate, cost of raw materials will be increased by 25% ana labour cost will also increase by
15%
50% of overhead charges are fixed and the rest is variable. The selling expenses per unit will also be reduced
by 25% . There will be no change in rate of profit.
Prepare Cost Statements for both the years 2014 and 2015

4. Sagar manufacturing company gives you the following particulars for the year 2012. Production and sales
during the year was 20000 units
Dr Cr
Particulars amount Particulars amount
Material 500000 Factory overhead :
Direct wages 300000 fixed 200000
Administrative overheads(fixed) 200000 variable 400000
Sales 2400000 Selling and distribution overheads :
profit 500000 fixed
variable 120000
180000

The company has work to its maximum capacity of 20000 units during the year 2012.
The management has decided to increase production capacity to 30000 units for the year 2013 and it is
estimated that:
i. There will be all round rise in all variable expenditure by 10%
ii. There will be increase of 20% in all fixed overheads
iii. There will be no need to change the selling price for the year 2013
Prepare Cost Sheet for the year 2012 with the cost for unit column and also prepare Estimated Cost Sheet for
the year 2013 with cost per unit column.

4. Details of Income and Expenses of Chetan Ltd. for the year ended 31-12-2013 was as under:

Particulars ₹ Particulars ₹
To Office Expenses 39,200 By Gross Profit 60,950
To Selling Expenses 23,000 By Interest on Deposit 2,500
To Loss on Sale of Machinery 1,250 By Dividend 3,450
To Depreciation on Machinery 1,800 By Net Loss 1,850
To Depreciation on Building 2,300
To Debenture Discount 400
To Preliminary Expenses 800

68,750 68,750

As compared to Cost Accounts, Office indirect expenses are 12% more in Financial accounts while
Selling indirect expenses are 8% less.
Depreciation on machinery was over-estimated by 350, while depreciation on building was under estimated
by 150.
Prepare (1) Statement of Cost and Profit/Loss and (2) Statement showing reconciliation of profit or loss Of
Cost And Finance account

5. A firm of contractors commenced three contracts viz. A, B, C on 1st April, 2012, on 1st October, 2012 and
on 1st January, 2013 respectively. The following particular of contracts are obtained for the year ended 31st
March, 2013.
Particulars Contract A Contract B Contract C
Contract Price (₹) 8,00,000 2,50,000 2,50,000
Materials Issued (*) 1,44,000 58,000 20,000
Wages Paid (*) 2,20,000 1,12,400 14,000
Direct Expenses Paid (*) 10,400 3,600 1,400
Plant Installed (₹) 40,000 16,000 12,000
Material at site at end of the year (*) 8,000 4,000 2,000
Wages Outstanding (*) 6,800 3,600 1,600
Work Certified ( % of contract price) 50% 64% 14.4%
Cash Received 75% 75% 75%
Work Uncertified (*) 12,000 8,000 2,100
Direct Expenses Prepaid (*) 1,200 400 200
The plants are installed on respective dates of the contracts and depreciation is to be provided at 10% p.a.
Prepare Contract Accounts A, B and C and show the calculation of profit transferred to Profit and Loss
Account.

6. Product is obtained after passes through three distinct processes. You are required to prepare process
accounts from the following information:
Input of process 1000 units
Particular Process A Process B Process C
Material(₹) 12000 10000 9000
Direct labour (₹) 16000 5000 4900
Manufacturing expenses (₹) 2000 3400 3590
Normal loss % 20% 15% 10%
Scrap value per unit 1 2 3
Actual output(units) 18000 16000 15000
Prepare Process account for A ,B & C

7. A construction company under took a contract at a estimated price of ₹ 108 lakhs which includes a
budgeted profit of 18 lakhs the relevant data for the year ended 31st March 2018 are as under
Material issued to site 5000000
Direct wages paid 3800000
Plant hired 700000
Site office cost 270000
Material returned from site 100000
Direct expenses 500000
Work certified 10000000
Progress payment received 7200000
A special plant was purchase specifically for this contract at rupees 8 lakhs and after use of this contract till
the end of 31st March 2018 it was valued at rupees 5 lakhs. The cost of material at site at the end of the year
was estimated at ₹ 18lakhs.
Direct wages accrued as on 31st March 2018 was 110000.
You are required to prepare the contract account for the year ended 31st March 2018 and compute the profit
to be taken to the profit and loss account.

8.The product of a company passes through three distinct processes to completion. These processes are
known as X, Y & Z. From the past experience, it is ascertained that wastage is incurred in each process as
under: Process X - 2%, Process Y - 4%, Process Z-10%.
The wastage at each process possesses scrap value. The wastage of processes X and Y is sold at ₹ 2.50 per
unit, and that of process Z at 5.00 per unit. The output of each process passes immediately to the next process
and finished units are transferred from process Z into stock. The following information is obtained.
Particulars X(₹) Y(₹) Z(₹)
Material 2,70,000 2,60,000 1,20,000
Wages 4,30,000 2,40,000 1,30,000
Direct Expenses 1,37,500 1,45,000 1,80,000

50,000 units were put in process X at a cost of 10 per unit. The output of each process is as follows:
Process X- 48,750 units, Process Y - 47,000 units, Process Z- 42,000 units.
There is no stock of work in progress in any process.
Prepare the process accounts, abnormal gain account and abnormal loss account

9. The following is the summary of the entries in a Contract Ledger as on 31st December, 2013 in respect of
Contract No. 51:

Particulars ₹
Materials (Direct 60,000
Materials (from stores) 13,000
Direct Expenses 34,600
Wages 13,400
Establishment charges 16,000
Plant 68,400
Sale of Scrap 3,640
Sub-contract Cost 14,400

You are given the following information:

(1) Accruals on 31-12-2013 are: Wages 1,600 and Direct Expenses 2,200.
(2) Depreciation on plant upto 31-12-2013 is 17,100.
(3) Included in the above summary of abstract are wages 2,000 and other expenses 3,000 since certification.
The value of the material used since certification is ₹ 4,160.
(4) Materials on site on 31-12-2013 cost 20,000.
(5) Work Certified was 1,25,000.

Prepare Contract Account No. 51 and show that profit or loss should be taken into account for the year ended
31st December 2013

10. The net profit of Dhruva limited shown by cost account for the year ended 31st March 2015 was ₹
1035000 and by financial account for the same period was ₹ 500200 .a scrutiny of the figures of financial
account and the cost account reveal the following facts;
Administrative overheads under recovered in cost account 14800
Factory overheads over recovered in cost account 20000
Depreciation overcharge in financial account 40000
Interest on investment 20000
Loss due to absollens charge in financial account 24000
Abnormal labour wastage charge in financial account 200000
Income tax provided in financial account 280000
Bank interest credited in financial account 4000
Stock adjustments credited in financial accounts 28000
Loss due to depreciation in stock value charge in financial account 48000
Prepare reconciliation statement.
11. ) Siddhesh construction company has Undertaker three contracts during the year and the following
particulars are available as on 31st 12 2014
A B C
Contract price 10 lacs 25 lacs 750000
Material issued to contract 165 200 224500 189600
Labour 102800 126500 175500
Sub contract charges 72800 65900 28500
Supervision charges 12000 18000 15,000
Architect fees 10000 15000 25,000
Insurance charges 3000 6100 7400
Work certified 4 lakhs 5 lacs 5,00,000
Work unsatisfied 35000 40000 25000
Closing stock of material 9000 10000 20,000
Amount received from contract 320000 45 0000 375000
All contracts for comments during the current year.
Total depreciation on plant a mountain to rupees 11200 and allocate the same to all contracts in the ratio of
work certified. Prepare contract account show the calculation of profit transfer to profit and loss account.

12. Contract price was ₹ 6000000. The 7 /10th of the contract was completed however architect gave
certificate only for 50% of the contract price on which 80% was paid .
Cost incurred to date ₹ 3500000. Calculate the work certified, the cost of work certified and the payment
received from contractee
13. Product XYZ is obtained after passes through three distinct processes. You are required to prepare
process accounts from the following information:
Particular Process A Process B Process C
Material(₹) 5200 3960 5924
Direct waGes (₹) 4000 6000 80000

Production 4000 6000 80000

overheads(₹)

1000 unit @ ₹ 6 per unit was introduced in Process A

Process Actually output units Normal loss Value of scrap per
unit(₹)
A 950 5% 4
B 840 10% 8
C 750 15% 10

Prepare Process account for A ,B & C

14. From the following particulars prepare caused showing total cost
Particulars Amount
Raw material 66000
Production wages 70000
Direct expenses 6000
Factory rent and Taxes 15000
Unproductive wages 21000
Factory maintenance 4400
Factory heating 3000
Mote power 8800
Office stationery 1800
Factory rent 6000
Directors fees work 2000
Directors fees office 4000
Factory cleaning 1000
Sundary office expenses office expenses 400
Factory lighting 1600
Factory stationery 1500
Water supply 1400
Office salary 1000
Factory insurance 2200
Office insurance 1000
Office stationery 800
Rent of warehouse 600

15. From the given data below of Krishna Limited, you are required to prepare a Statement of Reconciliation
of profit as per Cost account as on 31st March 2017
PARTICULARS AMOUNT (₹)
Net profit as per cost account 500000
Net profit as per financial account 485000
Under absorption of administration overheads 35000
Bad debts written off in financial account only 25000
Bank interest paid 25000
Debenture interest paid 40000
Dividend on investment 40000
Interest earned during the year 25000
over valuation of closing stock 15000
over valuation of opening stock 35000
Preliminary expenses written off during the year 40000
Profit on sale of plant and machinery 50000
Rent received during the year 50000
Over absorption of selling overheads 25000
Under absorption of work overheads 20000