Exam (elaborations)
COST BOOKKEEPING-QUESTIONS & ANSWERS.
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QUESTION 1 QUESTIONSCOST BOOKKEEPING
b) The following balances were provided in the cost ledger of GDR Ltd., a manufacturing company
as at 1 April 2013:
Debit Credit
Sh. Sh.
Stores ledger control account 250,000 -
Finished goods control account 350,000 -
Work in progress control account 120,000 -
Cost ledger control account - 720,000
720,000 720,000
The following transactions took place during the year ended 31 March 2014:
Sh.
Wages paid 400,000
Direct wages charged to production 250,000
Indirect wages charged to production 100,000
Wages paid to office staff 50,000
Materials purchased 500,000
Materials issued to production 350,000
Materials issued for repairs 100,000
Materials returned to vendor 50,000
Materials returned to store for production 60,000
Materials lost in a fire 80,000
Production expenses 200,000
Production overhead recovered 350,000
Administrative expenses 110,000
Administrative overheads absorbed 162,000
Goods finished during the year 700,000
Selling and distribution expenses 180,000
Selling and distribution costs absorbed in the cost of sales 200,000
Finished goods sold 600,000
Sales 1,000,000
Required:
i) Prepare necessary accounts in the cost ledger.
ii) A trial balance as at 31 March 2014.
QUESTION 2
b) Describe three causes of differences between cost accounting profits and financial accounting
profits under interlocking cost accounts.
QUESTION 3
b) Mexwel Ltd. maintains separate books for financial accounting and cost accounting.
, The extracts from the financial accounting books of the company for the year ended 31 October
2012 was as follows:
Sh.
Opening inventory: Finished goods 223,125
Work-in-progress 96,000
Transactions during the year:
Raw materials consumed 2,340,000
Direct labour 1,350,000
Factory overheads 900,000
Goodwill impairment 300,000
Administrative overheads 885,000
Dividends paid 255,000
Bad debts written off 36,000
Selling and distribution overheads 183,000
Interest received 135,000
Rent received 54,000
Sales (14,500 units) 6,240,000
Closing inventory: Finished goods (375 units) 123,750
Work-in-progress 115,995
Additional information:
1. Opening inventory of finished goods is valued at Sh.312 per unit sold.
2. The company values work-in-progress at factory cost for both financial profit and cost
profit reporting.
3. Factory overheads are absorbed at 60% of direct labour.
4. Administrative overheads are recovered at 20% of factory cost.
5. Selling and distribution overheads are charged at Sh. 12 per unit sold.
6. The number of units produced during the year was 14,000.
Required;-
Prepare statements for the year ended 31 October 2012 to show:
(i) The profit as per cost accounting records.
(ii) The profit as per financial accounting records.
QUESTION 4
Takers Limited operates separate cost accounting and financial accounting systems. The following
manufacturing and trading statement has been extracted from the company‟s financial accounts for
the quarter ended 31 march 2011
Sh. „000‟ Sh. „000‟
Raw Materials
Opening stock 48,800
Purchases 108,000
156,800
Closing stock (52,000)
Raw materials consumed 104,800
Direct wages 40,200
Production overheads 60,900
Production cost incurred 205,900
Work –in-progress
Opening stock 64,000
, Closing stock (58,000) 6,000
Cost of goods produced 211,900
Sales 440,000
Finished goods:
Opening stock 120,000
Cost of goods produced 211,900
331,900
Closing stock (121,900)
Cost of goods sold (210,000)
Gross profit 230,000
The following information has been extracted from the cost accounts of the company:
Sh. „000‟
Control account balances as at 1 January 2011
Raw materials stores 49,500
Work in progress 60,100
Finished goods 115,400
Additional information:
1. The cost accounts indicated that raw materials issued during the quarter ended 31 March
2011 amounted to sh. 104,800,000
2. As per the cost accounts cost of goods produced and cost of goods sold amounted to sh.
222,500,000 and sh. 212,100,000 respectively
3. Raw materials lost through floods amounted to sh, 2,400,000 Insurance claim for these raw
materials is pending
This claim was reflected in the cost accounts
4. A notional rent of sh. 4,000,000 per month has been charged in the cost accounts
5. Production overheads were absorbed at the rate of 185% of direct wages
Required:
a) Prepare the following control accounts in the cost ledger
i. Raw materials stores
ii. Work in progress
iii. Finished goods
iv. Production overhead
b) A statement reconciling the gross profit as per the cost accounts and the gross profit as per the
financial accounts
May 2011 Question One
QUESTION 5
(a) Explain the financial and non-financial performances measures used by business organizations.
(b) Distinguish between valuation of assets based on current cost and historical cost.
(c) Biashara Ltd. maintains separate cost and financial accounts. In the financial accounts for the
three months.
Raw materials Sh. „000‟ Sh. „000‟
Opening stock 976
Purchases 2,160
3,136
Closing stock (1,040)
Raw materials consumed 2,096
Direct wages 804
Production overheads 1,218 2,022
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