Prepare process account and finished stock.Account showing profit element at each stage
Answers
answer:-
Process Cost Accounting
1. Separate account is opened for each process or department. All costs (both direct and indirect) are charged to each such process or department.
2. The physical units (quantity) of output in each process are recorded in the respective process accounts.
3. The cost per unit of output is determined by dividing the total cost of each process by total production at the end of each period.
4. The total cost of one process is transferred to the next process as an initial cost till the production is completed. The cumulative costs of different processes determine the total cost and per unit cost at the final stage.
5. When there is work in progress at the end of the period, the stage of completion of the incomplete work is determined, and the computation of inventory is in terms of equivalent production units. For example, if 100 units are 40% complete, they are taken as equivalent to 40 completed units. The total number of completed units divides the total cost and the unit cost is obtained for the process.
6. In case of any normal loss in the
process, the units produced in that
process bear that loss. Accordingly
the average cost of that process is
increased. In case of any abnormal
loss, it is treated as general
business loss and transferred to
costing profit and loss account.
Explanation:
Procedure of Process Cost Accounting!
1. Separate account is opened for each process or department. All costs (both direct and indirect) are charged to each such process or department.
2. The physical units (quantity) of output in each process are recorded in the respective process accounts.
3. The cost per unit of output is determined by dividing the total cost of each process by total production at the end of each period.
4. The total cost of one process is transferred to the next process as an initial cost till the production is completed.
The cumulative costs of different processes determine the total cost and per unit cost at the final stage.
5. When there is work in progress at the end of the period, the stage of completion of the incomplete work is determined, and the computation of inventory is in terms of equivalent production units.
For example, if 100 units are 40% complete, they are taken as equivalent to 40 completed units. The total number of completed units divides the total cost and the unit cost is obtained for the process.
6. In case of any normal loss in the process, the units produced in that process bear that loss. Accordingly the average cost of that process is increased.
In case of any abnormal loss, it is treated as general business loss and transferred to costing profit and loss account.
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