1. Process Cost Accounting System
Lecture – 19
Main Ahmad Farhan

2. Process Costing There is large scale production of homogenous units.
The manufacturing process does not change.
Departmentalization is followed in manufacturing process.
Proceeding department’s output is the raw material for its succeeding department.
Out put / production is not inline with the customers specific orders but based on market demand.
Each Department is a cost centre.
Cost is Accumulated at each department level.

3. Beverage manufactures Printing industry Ball point manufactures
Examples
Beverage manufactures
Printing industry
Ball point manufactures
Ice Cream manufactures
Soap manufactures
Tooth Paste manufactures
Brush manufactures
Paints manufactures
Sugar manufactures

4. Difference Between Job Order & Process Costing
Nature
Job Order Costing
Process Costing
1- Base
Customers specification.
Market demand (carried on each Department).
2- Product /out put/Cost unit
Heterogeneous cost units
Homogenous cost units
4- Cost Accumulation
Specific job assigned a unique job code.
Department wise.
5- Cost per unit
Cost of completed Job.
Average unit cost
6-Accounting Systems
(a) Source Document
Job order Cost Sheet.
Process cost sheet or cost of production Report.
(B) Ledger Accounts
W.I.P Job A/c
Cost of job Completed A/c.
W.I.P Dept A/c I.
W.I.P Dept A/c II.
Finished Goods A/c.
(C) Pricing
Cost+ Margin or fixed (based on customer specification or precious of order.
Fixed Price.

5. Source Documents Direct Material Direct Labor Factory Over Head
Purchase Requisition /
Material Requisition / Store Requisition
Clock Cards / Smart Cards.
First Direct Material than arrow and than box as on ward
O.A.R

6. Elements of Cost of Production Report
Quantity schedule.
Cost accumulated in the department/ process.
Calculation of equivalent units produced.
Calculation of cost per unit.
Accounting treatment / apportionment of the accumulated cost.

7. Cost of Production Report
I- Quantity Schedule:
Units put into the process **
Units completed in this process & transferred
to next department. **
Units not yet completed at the end of the
Period ** **
II- Cost Accumulated In The Department / Process:
Direct Material Cost **
Direct Labor **
Factory Overhead (Applied) **
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8. Cost Of Production Report
III- Calculation Of Equivalent Units Produced
100% of completed units + % completed of the in process units
IV- Calculation Of Per Unit Cost
= Total Cost
Equivalent Units Produced

9. Cost Of Production Report
Accounting Treatment
1- Finished goods
2- Closing Work in process