# Journal Entries — Non-Integrated Accounting System

Under the non-integrated system every transaction is recorded among the cost ledger accounts, with the General Ledger Adjustment A/c (GLA) acting as the link to the financial world. Group the entries into four families: Raw Materials, Wages, Overheads, and Transfers.

## A. Raw Materials

#	Transaction	Entry
1	Raw materials purchased	Stores Ledger Control A/c Dr → To GLA A/c
2	Direct material issued to production	WIP A/c Dr → To Stores Ledger Control A/c
3	Material returned to stores	Stores Ledger Control A/c Dr → To WIP A/c
4	Raw material returned to supplier	GLA A/c Dr → To Stores Ledger Control A/c
5	Direct material bought by factory for a special order	WIP A/c Dr → To GLA A/c
6	Indirect material issued	Production Overheads A/c Dr → To Stores Ledger Control A/c
7	Abnormal raw material loss	Abnormal Loss A/c Dr → To Stores Ledger Control A/c
8	Material transferred between jobs	Transferee Job A/c Dr → To Transferor Job A/c

## B. Wages

#	Transaction	Entry
1	Wages incurred	Wages Control A/c Dr → To GLA A/c
2	Wages utilised (allocated)	WIP / Production OH / Admin OH / Selling OH / Abnormal Loss A/c Dr → To Wages Control A/c

Direct wages go to WIP; indirect wages are split across the overhead accounts; abnormal idle-time element goes to Abnormal Loss.

## C. Overheads

#	Transaction	Entry
1	Production OH incurred	Production OH A/c Dr → To GLA A/c
2	Admin OH incurred	Administrative OH A/c Dr → To GLA A/c
3	Selling OH incurred	Selling OH A/c Dr → To GLA A/c
4	Absorption of Production OH	WIP A/c Dr → To Production OH A/c
5	Absorption of Admin OH	Cost of Sales A/c Dr → To Administrative OH A/c
6	Absorption of Selling OH	Cost of Sales A/c Dr → To Selling OH A/c

### Under-Absorption of Overheads

#	Overhead	Entry
7	Production OH under-absorbed	Cost of Sales / Finished Goods / WIP A/c Dr → To Production OH A/c
8	Admin OH under-absorbed	Costing P&L A/c Dr → To Administrative OH A/c
9	Selling OH under-absorbed	Costing P&L A/c Dr → To Selling OH A/c

## D. Transfer (Other) Entries

#	Transaction	Entry
1	Goods completed	Finished Goods Control A/c Dr → To WIP Control A/c
2	Cost of goods sold	Cost of Sales A/c Dr → To Finished Goods Control A/c
3	Sale of completed goods	GLA A/c Dr → To Costing P&L A/c

## Doubt Busters

1. Over-absorption is recorded with the exact inverse of the under-absorption entry.

2. Sometimes Administrative OH is treated as a product cost (i.e. used to value Finished Goods). When that happens, under/over absorption of Admin OH adjusts the Finished Goods A/c instead of the Costing P&L A/c.

## Key Takeaway

Whenever value enters from or leaves to the outside world (purchases, wages paid, overheads incurred, sales), the GLA A/c is the other leg. Internal movements (issue to production, completion, sale costing) flow account-to-account without touching GLA.

Worked example

### Example 1

Purchase and issue of raw material. A firm buys ₹50,000 of raw material on credit, then issues ₹40,000 of it (direct) to production.

Purchase:

```

Stores Ledger Control A/c Dr 50,000

To General Ledger Adjustment A/c 50,000

```

Issue to production:

```

WIP A/c Dr 40,000

To Stores Ledger Control A/c 40,000

```

Stores Ledger Control now shows a ₹10,000 balance of material still on hand.

### Example 2

Recording and absorbing production overhead. Production overhead of ₹20,000 is incurred; ₹18,000 is absorbed into production.

Incurred:

```

Production Overhead A/c Dr 20,000

To General Ledger Adjustment A/c 20,000

```

Absorbed:

```

WIP A/c Dr 18,000

To Production Overhead A/c 18,000

```

The Production OH A/c is left with a ₹2,000 under-absorption, cleared as: Cost of Sales/Finished Goods/WIP A/c Dr 2,000 → To Production OH A/c 2,000.

### Example 3

Sale of finished goods. Goods costing ₹35,000 are completed and then sold for ₹45,000.

```

Finished Goods Control A/c Dr 35,000

To WIP Control A/c 35,000

Cost of Sales A/c Dr 35,000

To Finished Goods Control A/c 35,000

General Ledger Adjustment A/c Dr 45,000

To Costing Profit and Loss A/c 45,000

```

The ₹10,000 difference between sales (₹45,000) and cost of sales (₹35,000) is the costing profit.

⚠️ Common exam mistakes

Using the wrong debit account for under-absorption: Production OH under-absorption is spread over Cost of Sales/Finished Goods/WIP, but Admin and Selling OH under-absorption go straight to the Costing P&L A/c.
Forgetting that over-absorption is simply the reverse entry of under-absorption — students often try to invent a new entry.
Routing 'material returned to supplier' through WIP. It is a reversal of purchase, so it goes through the GLA A/c (GLA Dr → To Stores Ledger Control).
Debiting the supplier/creditor directly. In the cost ledger there is no creditor account — the GLA A/c stands in for all such financial accounts.
Missing the special case where Admin OH is a product cost, in which case its under/over absorption hits Finished Goods A/c, not Costing P&L.

Reference:

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Journal Entries under Non-Integrated Accounting System

Worked example

⚠️ Common exam mistakes