Multan Educational Academy

Cost Accounting Notes Past papers of University of Sargodha

Answers of Short questions Subsidiary Ledger

Special or supporting ledger (such as cost ledger, purchases ledger, sales ledger) that provides more detailed information about individual accounts than a general ledger. Used by firms with larger number of customers (or creditors), these ledgers divide masses of financial data into more manageable parts. Total of all individual accounts in a subsidiary ledger equals the balance of the corresponding summary account (called control account) in the general ledger.

Purchase Order
A purchase order is a type of document given by a buyer to a seller which indicates the quantities, types and prices of the products. The purchase order is created for a legally binding contract which cannot be changed without the permission of two parties

PURCHASE LEDGER
It is ledger in which the personal accounts of an organizations suppliers are recorded. The total of the balances in this ledger represents the organizations trade creditor.

BATCH COSTING
A form of costing in which the unit costs are expressed on the basis of a batch produced. This is particularly appropriate where the cost per unit of production would result in an infinitesimal unit cost and where homogenous units of production can conveniently be collected together to form discrete batches.

BATCH PRODUCTION
A manufacturing process in which medium to high volumes of similar items are made in batches, rather than continuously, with the product moving from process to process in batches. The key to batch production is the careful scheduling of work to ensure good utilization of capacity and to minimize the capital locked up in work in progress.

From the desk of Syed Ali Afaq

Page 1

Multan Educational Academy

PAYROLL REGISTER
A report listing and summarizing the compensation paid and deductions taken from each employees wages for the payroll period. Information in payroll register includes employee's name, regular hours, sick hours, overtime hours, federal income taxes withheld, medical insurance deductions, union dues, gross pay, and net pay. The payroll register may be used as a supplementary record or as a special journal.

Budgeted Variance
A budget variance is the difference between the budgeted or baseline amount of expense or revenue, and the actual amount. The budget variance is favorable when the actual revenue is higher than the budget or when the actual expense is less than the budget.

CONVERSION COST
The cost incurred in a production process as a result of which raw material is converted into finished goods. The conversion costs usually include direct labor and manufacturing overhead but exclude the costs of direct material itself.

PRODUCTION VOLUME VARIANCE

The amount of fixed overhead costs that are not allocated to a product because actual production varies from budgeted production. Also known as fixed overhead volume variance. Mathematically, production volume variance is expressed as: (Actual Production - Budgeted Production) x Budgeted Overhead Rate With the budgeted overhead rate defined as (budgeted fixed overhead / budgeted production). It may also be expressed as: (Actual Production - Factory Capacity) x Budgeted Overhead Rate

Process Costing
Method for determining the total unit cost of the output of a continuous production run (such as in food processing, petroleum, and textile industries) in which a product passes through several processes (or cost centers). OR
From the desk of Syed Ali Afaq Page 2

Multan Educational Academy

PROCESS COSTING is a method of cost accounting applied to production carried out by a series of chemical or operational stages or processes. Its characteristics are that costs are accumulated for the whole production process and that average unit costs of production are computed at each stage.

Safety Stock
Inventory held as buffer against mismatch between forecasted and actual consumption or demand, between expected and actual delivery time, and unforeseen emergencies. Also called reserve inventory.

Expected actual capacitySimilar to normal capacity, except it is a short-run level based on demand, it minimizes underor over applied overhead but does not provide a consistent basis for assigning overhead cost. Per-unit overhead will fluctuate because of short-term changes in the expected level of output. Also called planned capacity.

From the desk of Syed Ali Afaq

Page 3