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  Working Mechanics of Integrated Accounting

Working Mechanics of Integrated Accounting System

Earlier than accepting this system, the management has to determine regarding to the degree of integration which is planned. A number of the firms integrate accounts up to the stage of prime cost or factory cost. Occasionally the entire record is integrated. The following accounts are generally maintained within this system.

A. Main Accounts:

The following accounts are mainly kept.

I. Stock Control Accounts:

This account is prepared for the following items:

a. Raw Materials: Opening stock and purchases are debited to this account while the materials issued are credited. The balance demonstrates the raw material on hand at the end of the period.

b. Work-in-progress: The opening stock of work-in-progress and factory overheads is debited to this account when the cost of finished goods is added. The closing stock, if there is any, is carried forward to the next period.

c. Finished Stock: This account is termed as finished goods account also. It is debited along with the finished goods and credited with cost of sales.

II. Cost of Sales Account:

The Cost of goods that is sold is debited to this account and the finished goods account is added.

III. Assets Accounts:

These accounts are opened for every of the fixed assets possessed through the firm. For instance, accounts are preserved for assets such as Plant and Machinery, Land and Building, Vehicles, Furniture and Fixtures and other such type of fixed assets owned through the firm. Transactions associated along with the fixed assets are entered in these accounts. For instance, the purchases are debited when depreciation and any disposal of such type of assets is credited to these accounts.

IV. Debtors and Creditors Control Account:

Transactions related along with debtors and creditors are recorded in these accounts. The balance displayed through debtors account should tally along with the sales ledger while the balance displayed through creditors account should tally with the purchase ledger.

V. Prepaid Expenses and Outstanding Expenses Account:

These accounts are kept for recording any prepaid expenses or any expense that is due but not paid that is outstanding expenses. The prepaid amount is debited to the prepaid account and added to overhead control accounts. So, it is makes sure that the expenses that is associated to the period only is charged to the work-in-progress account. In the example of outstanding expenses, the outstanding expenses account is added and the overhead control account is debited. On the time of actual payment, the expenses outstanding account is debited and corresponding credit is provided to either cash account or bank account or it is adjusted by overhead control account.

VI. Direct Wages and Overhead Costs Control Accounts:

While these costs are acquired, the appropriate control accounts are debited and cash account is credited. So, when direct wages are paid, they are debited to direct labour control account and transferred to the work-in-progress account on the debit side. Suitable overhead control account is credited. In case the actual payments do not compute along with the expenditure associated to that period, suitable adjustment is made.

VII. Cost Center Account:

An account is reserved for each department or cost center. This assists in knowing the cost of a department and controlling costs related with dissimilar departments.

VIII. Cash Account:

All cash payments and receipts are recorded in this account.

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