Cost Accounting Questions
Questions on Accounting For Costs
QUESTION ONE
- Explain the following terms as used in accounting for costs:
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- Financial Accounting
- Management Accounting
- Cost Accounting (12 marks)
- Explain how the following accounts are used in cost accounts
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- Ledger Adjustment account
- Stores Ledger Control Account
- Work in Progress Ledger Control Account
- Finished Goods Ledger Control Account (8 marks) (Total: 20 marks)
QUESTION TWO
- Explain the reasons that cause the profit figures in the cost accounting books and those in the financial books to be different. (Total: 20 marks)
- The profit shown in the financial books as at 31 March 2004 was Sh.11,287 and for the same period, the cost accounting books showed a profit of shs.2,704. After checking the two sets of accounts for the source of the differences, the following issues come to your attention:
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Cost Accounts Financial Accounting Shs Shs Depreciation 9,826 10,520 Stock valuations Opening stocks 27,510 25,500 Closing stocks 18,218 18,750 Profit on sale of asset - 850 Dividends Received - 2,635 Imputed Rent Charge 3,250 -
Required:
Prepare a statement to reconcile the two profits, starting with the profit as per financial accounts. (Total:20 Marks)
QUESTION THREE
The profit shown in the financial accounts is Shs.18,592 and for the same period, the cost accounts showed a profit of 20,496. Comparison of the two sets of accounts revealed the following:
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Stock Valuations: Cost Accounts Financial Accounts - Raw Materials
Shs Shs - Opening Stock
6,821 7,259 - Closing Stock
5,483 5,128 - Finished Goods
- Opening Stock
13,291 12,905 - Closing Stock
11,430 11,131
Dividends and interest received of shs.552 and a loss of 1,750 on the sale of a milling machine were not entered in the cost accounts
Required
Prepared a reconciliation of the two profits. (Total: 20 marks)
QUESTION FOUR
The following are the final accounts of XYZ Limited for the year ending 31st December 2004
Manufacturing Trading Profit and Loss Appropriation Account
Total Factory Costs c/d | 311,000 | Sales | 480,000 |
Finished Goods: opening stock | 20,000 | ||
Cost of Goods Manufactured | |||
And Transferred b/d | 311,000 | ||
331,000 | |||
Less Closing stock | (22,000) | ||
309,000 | |||
Gross Profit c/d | 171,000 | ______ | |
480,000 | 480,000 | ||
Expenses: | |||
Office Salaries: | 35,000 | Gross Profit b/d | 171,000 |
Office Expenses: | 20,000 | Dividends Received | 3,000 |
Salesman Commissions | 18,000 | Interest on Bank Deposits | 1,000 |
Selling Expenses: | 15,000 | ||
Loss on sale of land | 1,000 | ||
Distribution Expenses | 13,000 | ||
Interest on Mortgage | 2,000 | ||
Fines | 1,000 | ||
Net Profit c/d | 70,000 | ______ | |
175,000 | 175,000 | ||
Taxation | 24,000 | Net Profit b/d | 70,000 |
Transfers to General Reserve | 9,000 | Retained Earnings b/f | 36,000 |
Ordinary share dividend | 18,000 | ||
Preference Dividends | 11,000 | ||
Goodwill written off | 37,000 | _______ | |
106,000 | 106,000 | ||
Retained Profit b/f | 37,000 |
Additional Information
1. The cost accounting records show the following:
2. Profits were shs.114,000. Office salaries and office expenses provided for as (in the financial books)
- Opening Stocks: Raw Materials 26,000
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- Work in Progress 21,000
- Finished Goods 23,000
(ii) Closing Stocks: Raw Materials 30,000
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- Work in Progress 20,000
- Finished Goods 24,000
Required
Prepare a Memorandum Reconciliation Account. (Total: 20 Marks)