# Journal Entries in Cost Accounting

In cost book-keeping, two parallel systems are followed:

Integrated (Integral) System – a single set of books records both cost and financial transactions. Cash/Bank accounts appear directly.
Non-Integrated System – cost and financial books are maintained separately. The cost ledger uses a General Ledger Adjustment Account (Gen Ledg Adj a/c) in place of Cash/Bank, because Cash/Bank does not exist in the cost ledger.

The entries differ only in whether the credit/debit goes to Cash/Bank (integrated) or to Gen Ledg Adj a/c (non-integrated). The control accounts (WIP, FOH, RM, Wages, FG, S&D, AOH) are the same.

## Standard Entries (Sl. 8 – 16)

#	Transaction	Integrated System	Non-Integrated System
8	FOH recovered	WIP Control a/c Dr — To FOH Control a/c	Same
9	FG completed	FG Control a/c Dr — To WIP Control a/c	Same
10	AOH incurred	AOH Control a/c Dr — To Cash/Bank	AOH Control a/c Dr — To Gen Ledg Adj
11	AOH recovered	FG Control a/c Dr — To AOH Control a/c	Same
12	FG transferred to Cost of Sales	Cost of Sales a/c Dr — To FG Control a/c	Same
13	S&D OH incurred	S&D Control a/c Dr — To Cash/Bank	S&D Control a/c Dr — To Gen Ledg Adj
14	S&D OH recovered	Cost of Sales a/c Dr — To S&D Control a/c	Same
15	Cost of goods transferred to P/L	Costing P/L Dr — To Cost of Sales a/c	Same
16	FG sold	Cash/Bank Dr — To Sales a/c	Gen Ledg Adj Dr — To Sales a/c

## Rule of Thumb

Wherever the integrated system shows Cash/Bank, the non-integrated system substitutes Gen Ledg Adj a/c. All other internal control account entries are identical.

Worked example

### Example 1

Example – Sale of Finished Goods

FG worth ₹2,00,000 sold for cash.

Integrated System:

```

Cash/Bank a/c Dr 2,00,000

To Sales a/c 2,00,000

```

Non-Integrated System:

```

General Ledger Adjustment a/c Dr 2,00,000

To Sales a/c 2,00,000

```

### Example 2

Example – FOH Recovered

FOH absorbed by production = ₹50,000. Entry is identical under both systems:

```

WIP Control a/c Dr 50,000

To FOH Control a/c 50,000

```

⚠️ Common exam mistakes

Using Cash/Bank in non-integrated cost books – Cash/Bank does not exist in the cost ledger; always use General Ledger Adjustment a/c.
Confusing the recovery entries (which always involve control accounts) with incurrence entries (which involve Cash/Bank or Gen Ledg Adj).
Forgetting that FG → Cost of Sales is a transfer entry (no cash movement), distinct from the actual sale entry.

Reference:

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Journal Entries in Cost Accounting (Integrated vs Non-Integrated System)

Worked example

⚠️ Common exam mistakes