Think of a business that runs two separate diaries — one for financial accounts (for the banker and tax officer) and another for cost accounts (for the factory manager). Every month, the accountant has to sit down and reconcile why the profit in both diaries doesn't match. That's the Non-Integrated system — double the work, double the headaches.
The Integrated Accounting System (also called the Integral System) solves this by maintaining just one set of books that records both financial and cost transactions together. There is no separate Cost Ledger — everything flows through a unified ledger. Because of this, there is no need for reconciliation between cost profit and financial profit — they are the same figure by design.
The system works through a set of Control Accounts that act as summary accounts in the main ledger, supported by subsidiary ledgers for detail. The key ones you must know: Stores Ledger Control Account (tracks raw material movements), Work-in-Progress (WIP) Control Account (tracks production costs in progress), Finished Goods Control Account (tracks completed stock), Production Overhead Control Account (collects and absorbs factory overheads), and Cost of Sales Account (records cost of goods sold, eventually transferred to P&L).
The flow is simple and logical: Raw materials purchased → Stores Ledger Control A/c. Materials issued → Debit WIP Control A/c. Labour (direct) → Debit WIP Control A/c. Overheads absorbed → Debit WIP Control A/c, Credit Production Overhead Control A/c. Production completed → Transfer from WIP to Finished Goods Control A/c. Goods sold → Transfer from Finished Goods to Cost of Sales A/c.
This is heavily examined as journal entries (5–8 mark questions) and sometimes as preparation of individual control accounts. The examiner loves giving you a list of transactions and asking you to pass journal entries under the integrated system — so practice the flow until it becomes automatic.