## Cost Accounting Systems
There are two main systems for maintaining cost accounts:
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## Non-Integrated (Cost Ledger) Accounting System
### Definition
Separate sets of books are maintained for cost accounts and financial accounts. Only production/supply-related transactions are recorded in the cost books.
### What is Excluded from Cost Books
- Interest, bad debts
- Revenue from non-product sources
- Purchases, certain expenses, fixed assets, debtors, creditors
To complete double-entry for excluded items, a Cost Ledger Control Account (= General Ledger Adjustment Account) is used.
### Key Characteristics
- Fewer accounts than financial accounting
- Focuses on production cost management
- Simpler to track production costs
- Does NOT provide a complete financial picture
- Best suited to manufacturing/production-based businesses
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## Principal Accounts in Non-Integrated System
| Account | Debit | Credit | Balance Represents |
|---|---|---|---|
| Cost Ledger Control A/c | Sales | All expenditures; Net P&L transferred in | Net total of all impersonal account balances |
| Stores Ledger Control A/c | Material purchases | Material issues | Closing stock of stores |
| Wages Control A/c | Total wages (direct + indirect) | Transfer to WIP (direct) or Overhead A/cs (indirect) | Nil (fully distributed) |
| Production Overhead Control A/c | Indirect production costs | Overhead absorbed (recovered) | Under/over absorption → Overhead Adjustment A/c |
| WIP Control A/c | Direct material + labour + expenses + production OH recovered | Finished goods completed | Value of jobs in progress |
| Admin Overhead Control A/c | Admin overheads incurred | Admin overheads recovered | Difference → Overhead Adjustment A/c |
| Finished Goods Control A/c | Transfer from WIP + admin OH (if production-related) | Cost of Sales A/c | Value of unsold goods |
| Selling & Distribution OH Control A/c | S&D overheads incurred | S&D overheads recovered | Difference → Overhead Adjustment A/c |
| Cost of Sales A/c | Finished goods + general admin OH + S&D OH recovered | Transfer to Costing P&L | — |
| Costing Profit & Loss A/c | Cost of sales + under-absorbed OH + abnormal losses | Sales + over-absorbed OH + abnormal gains | Net profit → Cost Ledger Control A/c |
| Overhead Adjustment A/c | Under-recovery of overheads | Over-recovery of overheads | Net balance → Costing P&L |
### Key Treatment Rules
- Abnormal idle time wages → Costing P&L (directly or via Abnormal Loss A/c)
- Abnormal stores losses/gains → Costing P&L
- Under/over absorption of overheads → Overhead Adjustment A/c → then Costing P&L
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## Integrated (Integral) Accounting System
### Definition
A single set of books serves both cost accounting and financial accounting purposes — no separate ledgers.
### Key Features
- One integrated set of books
- Eliminates the need for reconciliation between cost and financial profits
- Provides comprehensive information for both cost analysis and financial reporting
- More efficient in modern computerised environments