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CIMA C1
Fundamentals Of Management Accounting
Class Slides Ian Wilson
Introduction
There is NO statutory requirement to keep
detailed costing records.
Many smaller companies will not bother,
instead relying on Financial records.
In a larger, more complex business
however, cost accounting records are vital
to monitor and control what is taking place.
Integrated Accounting
Systems
What are they?.
Defined by CIMA as:
a set of accounting records that integrate
both financial and cost accounts, using
common input data for all accounting
purposes.
Integrated Accounting
Systems
Principal accounts in an integrated system:
4 areas to deal with:
1. Resources Accounts Materials/Wages etc
2. Cost of Production Accounts costs from
start to end of manufacture, Stock,
Labour, WIP/Finished Goods/Cost of Sales
3. Sales Accounts for invoicing customers
4. Income Statement summary of
Profit/Loss
Cost Accounts
Simple Rules:
A Flow into the Account is shown on the
DEBIT side:
A Flow out of the Account is shown on the
CREDIT side:
Both are Held in a T Account:
Obviously at the end of a period the
account needs to be balanced off.
Credit Entries:
Wages split into Direct & Indirect Labour
costs
Work-in-Progress Account
Debit Entries:
Costs associated with producing Units of
output are built up on the debit side, likely
to be Materials, Labour & Production
Overheads
Credit Entries:
This is the cost build up on the Debit side,
shown on the Credit side as an output to
Finished Goods
Production Overhead
Control
Used to build up the Indirect Costs
incurred by each production cost centre.
Debit Entries:
Overheads built up on the Debit side as
they are incurred in the period
Credit Entries:
Overheads Absorbed from the Prod O/H
A/C will be charged to the W.I.P. A/C based
on the OAR (BOAR)
Over/Under Absorption
As we saw earlier, we may OVER or UNDER
Absorb Overheads.
UNDER ABSORPTION shown on CREDIT
side of Production Overhead A/C balancing
figure
OVER ABSORPTION shown on DEBIT side
of Production Overhead A/C balancing
figure
The other side of the Under/Over
Absorption entry is in the P/L A/C
Exercise 1
Write up the relevant T entries:
You will need:
1. Calculate OAR per unit
2. Stock/Inventory Control
3. Labour Control
4. WIP
5. Production Overhead Control
6. Income Statement
Exercise 2
Write up the relevant T entries:
You will need:
1. Calculate OAR per unit
2. Stock/Inventory Control
3. Labour Control
4. WIP
5. Production Overhead Control
6. Income Statement
Variance:
Stores/Materials Control
Wages Control
Work in Progress
Work in Progress
Work in Progress
Overhead Control
Exercise 3 Labour
Variances
Lets try this example:
Materials & Overhead costs are given:
You have specific details for the Labour
costs including rate & efficiency variances
Exercise 4 Material
Variances
Integrated Accounting
Systems
Advantages of integration:
1. No duplication of effort
2. No need to reconcile financial & cost
accounts
3. Simplicity