Costing is a significant process of determining cost. Kohler defined cost audit as branch of accountancy dealing v the classification, recording, allocation, summarization and also reporting the current and prospective costs. According to Mr. Wheldon, cost accountancy is "the classifying, recording and also appropriate allocation of expenditure because that the decision of the costs of assets or services, the relationship of these costs to sales values, and the ascertainment of profitability." Cost accounting has its objective to preserve records connected with internal transactions (Dutta, 2003).
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There space numerous elements of cost accounting:price classification: This is defined as grouping of like items of expense into a usual group. Cost recording: This denotes come posting of cost transactions right into the various ledger kept under cost audit system. Cost allocation: This describes allotment of expenses to various assets or department.
Cost determination or cost finding: This refers to the determination of the expense of items or solutions by unshened procedure.
Cost reporting: This refers to furnishing of cost data top top a consistent basis so as to meet the needs of management.
Under cost accounting system, price Ledgers space maintained. Expense ledger is offered for keeping records relating come the genuine or nominal records. Actual accounts are those account which contain records of property, possessions or legacy of a company enterprise. They relate come cash, building, plant, machinery, furniture or fittings. In the name of accounts address income, expense, gain and also losses. For this reason sales, various other income, salaries and also wage are example of nominal account (Dutta, 2003). Expense ledger control account offer as a link in between financial and cost account.
Cost ledger can be categorized right into principle ledger and also subsidiary ledger with its control account.
Source: Mittal, D K, 2009
Cost ledger is rule ledger of cost account. It includes all personal account and similar to general ledger in financial books. The major benefits of expense ledger are that they aid in facilitating over material, labour and also overhead expense by offering by a summarized record of prices in various ledgers. Cost ledger assures that closing share of material, job-related in procedure and finished commodities properly valued without any kind of delay. Accounts because that each cost centres room prepared separately which offer as basis of cost analysis and control. Important data for formulating and setup standard is noted (Macmillan, 2008).
Control Accounts: A regulate account is a synopsis account in the basic ledger. The facts that assistance the balance in the an overview account are enclosed in a subsidiary ledger which is a ledger external of the basic ledger. The intentionally of the control account is to maintain the general ledger totally free of details, yet have actually the exactly balance because that the gaue won statements. The details on each customer and each transaction would not be taped in the account Receivable control account in the general ledger. Rather, this details the the account receivable activity will be in the account Receivable Subsidiary Ledger. Under interconnecting system, manage accounts are preserved in the cost ledger come complete double entry in cost books. These manage accounts are total accounts or adjustment accounts summarising buildup of information included in the subsidiary ledgers the is shop ledger, project ledger and finished share ledger.
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A regulate account is preserved in the price ledger therefore that double entry in the price ledger might be completed and make it self-balancing. These regulate accounts space posted v the totals of item which have been debited or credited in information to the account in the ledgers come which lock relate. The balance in regulate accounts symbolizes the total of balances in a variety of accounts of comparable nature preserved in that subsidiary ledger come which the regulate account relates. In enhancement to these regulate accounts for each the the subsidiary ledger, a price ledger regulate account is likewise kept in cost ledger. This is operated to make the expense ledger self-balancing.
Advantages: over there is several advantage of maintaining cost ledger (Bhabatosh Banerjee, 2014):It provides a check to ensure the all expenditure is accounted for in cost accounts through the aid of manage account. It provides a communication for settlement with the financial accounts. It offers a ready way of preparing monthly or periodic balance sheet, profit and loss account and statistics relating come cost. When expense accounts are separately maintained, the is possible to sustain confidentiality of price data.
It have the right to be developed that cost ledger is rule ledger in cost publications which consists of a regulate account for each of the subsidiary ledgers favor store ledger manage account, work-related in progress ledger manage account, finished products ledger regulate account. It additionally comprises of expense ledger manage account/general ledger adjustment account to do the expense ledger self-balancing. A expense ledger manage account is kept in expense ledger to finish the dual entry.