In this article we will discuss about Non-Integral System:- 1. Meaning of Non-Integral System 2. Basic Features of Non-Integral System 3. Ledgers 4. Practical Problems.
Meaning of Non-Integral System:
Non-integral system is a system of accounting under which two separate sets of account books are maintained—one for cost accounts and the other for financial accounts. In other words, cost accounts are maintained separately from financial accounts.
Since separate ledgers are maintained for cost and financial accounts in this system, the cost accountant is responsible for recording of the cost accounting transactions and the financial accountant is responsible for financial transactions.
Non-integral system of accounting is also known as non-integrated system or Inter-locking system or Cost Ledger Accounting system. CIMA, London defines Non-integral system as a system in which the cost accounts are distinct from financial accounts, the two sets of accounts being kept continuously in agreement by the use of control accounts or made readily reconcilable by other means.
Basic Features of Non-Integral System:
(i) Separate ledgers are maintained for cost and financial accounts.
(ii) Like financial accounting, it is also based on double entry system.
(iii) There are no personal accounts because cost accounts do not show relationship with outsiders.
(iv) Cost accounts are concerned with impersonal accounts i.e., real and nominal accounts.
(v) In real accounts, only stocks are shown in cost accounts.
(vi) Transactions affecting the nominal accounts are recorded separately in detail. Thus cost accounting department is concerned mainly with the ascertainment of income and expenditure of business,
(vii) Under this system one main ledger (i.e., Cost Ledger) and various subsidiary ledgers are maintained,
(viii) Since the system is not properly integrated, some items may appear in financial ledgers only, while some other items appear only in cost ledger,
(ix) The profit or loss disclosed by the two sets of accounts for a particular period will never be the same and as such a reconciliation of costing profit or loss with that of financial accounts is essential.
Ledgers under Non-Integral Accounts:
(a) The principal financial ledgers are:
(i) General Ledger:
It contains all real, nominal and personal accounts except trade debtors and trade creditors account.
(ii) Debtors Ledger:
It has personal accounts of trade debtors.
(iii) Creditors Ledger:
It has personal accounts of trade creditors.
(b) The principal cost ledgers are:
(i) Cost Ledger:
It is the principal ledger in cost books which controls all other ledgers in the costing department. It contains all impersonal accounts and is similar to General Ledger of financial accounts.
(ii) Stores Ledger:
It is a subsidiary ledger. It contains all stores accounts.
(iii) Work-in-Progress Ledger:
It is a subsidiary ledger. It contains a separate account for each job in progress. Each such account is debited with the materials costs, wages and overheads chargeable to the jobs and credited with the cost of work completed. The balance in this account shows the cost of uncertified work.
(iv) Finished Goods Ledger:
It is a subsidiary ledger. It contains accounts of completely finished goods and jobs. The cost ledger is made self-balancing by opening a control account for each of the above subsidiary ledgers.
Practical Problems Relating to Non-Integral System:
Pass Journal Entries in the cost books (non-integrated system) for the following transactions:
(i) Materials worth Rs. 25000 returned to the stores from job.
(ii) Gross total wages paid Rs. 48,000. Employer’s contribution to P.F and State Insurance amount to Rs. 2,000. Wages analysis book detailed Rs. 20,000 towards direct labour, Rs. 12,000 towards indirect factory labour, Rs 10,000 towards salaries etc. to office staff and Rs. 8,000 for salaries etc. to selling and distribution staff.
Pass necessary journal entries in cost account books for the following transactions under Non-Integrated System.
Under/Over absorbed overheads have been transferred to Costing Profit and Loss Account. Alternatively these may be carried forward to the next accounting period without passing any entry.
Pass journal entries in the cost books, maintained on non-integrated system, for the following: