Integrated accounts

In the absence of the accountant you have been asked to prepare a month’s cost accounts for a company which operates a batch costing system fully integrated with the financial accounts. The cost clerk has provided you with the following information, which he thinks is relevant:


Balances at beginning of month:

Stores ledger control account

24 175

Work in progress control account

19 210

Finished goods control account

34 164

Prepayments of production overheads

Brought forward from previous month

2 100


Transactions during the month:

Materials purchased

76 150

Materials issued: to production

26 350

For factory maintenance

3 280

Materials transferred between batches

1 450

Direct workers (£)

Indirect workers (£)

Total wages paid:


17 646

3 342

Employees deductions

4 364


Direct wages charged to batches from work tickets

15 236

Recorded non-productive time of direct workers

5 230

Direct wages incurred on production of capital

Equipment, for use in the factory

2 670

Selling and distribution overheads incurred

5 240

Other production overheads incurred

12 200


75 400

Cost of finished goods sold

59 830

Cost of goods completed and transferred into

finished goods store during the month

62 130

Physical stock value of work in progress at end of month

24 360

The production overhead absorption rate is 150% of direct wages, and it is the policy of the company to include a share of production overheads in the cost of capital equipment constructed in the factory.


(a) Prepare the following accounts for the month:

Stores ledger control account wages control account work in progress control account finished goods control account production overhead control account profit/loss account.

(b) Identify any aspects of the accounts which you consider should be investigated.

(c) Explain why it is necessary to value a company’s stocks at the end of each period and also why, in a manufacturing company, expense items such as factory rent, wages of direct operatives, power costs, etc. are included in the value of work in progress and finished goods stocks.