Question

Product A is obtained after it passes through three distinct processes, I, II and III. The following information is obtained from the accounts for the month of March, 2018 :

Particulars	Total(Rs.)	Process
		I(Rs.)	II(Rs.)	III(Rs.)
Direct material	15,084	5,200	3,960	5,924
Direct wages	18,000	4,000	6,000	8,000
Production Overheads	18,000

1,000 units at Rs. 6 each were introduced into Process I. There was no stock of material or work in progress at the beginning or at the end. The output of each process passes directly to the next process and finally to the finished stock. Production overhead is recovered at 100% of direct wages. The following additional data are obtained :

Process	Output during the Month (Units)	Percentage of Normal Loss to Input	Value of Scrap per unit
I	950	5%	Rs. 4
II	840	10%	Rs. 8
III	750	15%	Rs. 10

Prepare Process Accounts, Abnormal Loss Account and Abnormal Gain Account.

Answer 1

Books of .............

Dr.

Process - I Account

Cr.

Particulars	Quantity (Units)	Amount (Rs.)	Particulars	Quantity (Units)	Amount (Rs.)
To Units Introduced (1,000 x 6)	1,000	6,000	By Normal Loss Alc `(1,000  "Units" xx5/100) (50  "Units" xx Rs. 4)`	50	200
To Materials	-	5,200	By Process - II Alc	950	19,000
To Direct Wages	-	4,000
To Production Overheads (Rs. 4,000 x 100%)	-	4,000
	1,000	19,200		1,000	19,200

Dr.

Process - II Account

Cr.

Particulars	Quantity (Units)	Amount (Rs.)	Particulars	Quantity (Units)	Amount (Rs.)
To process - I Alc	950	19,000	By Normal Loss Alc `(950  "Units" xx10/100) (95  "Units" xx Rs. 8)`	95	760
To Materials	-	3,960	By Abnormal Loss ( Working Note-1	15	600
To Direct Wages	-	6,000	By Process - III Alc	840	33,600
To Production Overheads (Rs. 6,000 x 100%)	-	6,000
	950	34,960		950	34,960

Dr.

Process - III Account

Cr.

Particulars	Quantity (Units)	Amount (Rs.)	Particulars	Quantity (Units)	Amount (Rs.)
To process - II Alc	840	33,600	By Normal Loss Alc `(840  "Units" xx15/100) (126  "Units" xx Rs. 10)`	126	1,260
To Materials	-	5,924	By Finished Stock Alc	750	57,000
To Direct Wages	-	8,000
To Production Overheads (Rs. 6,000 x 100%)	-	8,000
To Abnormal Gain Alc (Working Note-2)	36	2,736
	876	58,260		876	58,260

Dr.

Abnormal Loss Alc

Cr.

Particulars	Quantity (Units)	Amount (Rs.)	Particulars	Quantity (Units)	Amount (Rs.)
To Process II Alc	15	600	By Bank Alc	15	120
			By Costing P and L Alc	-	480
			(Balancing Figure)	-
	15	600		15	600

Dr.

Abnormal Gain Alc

Cr.

Particulars	Quantity (Units)	Amount (Rs.)	Particulars	Quantity (Units)	Amount (Rs.)
To Normal Loss Alc (36 Units x Rs. 10)	36	360	By Process - III Alc	36	2,736
To Costin2 P and L Ale	-	2,376
	36	2,736		36	2,736

Working Notes : 
(1) Calculation of Cost of Abnormal Loss in Process - II :
Quantity : 950 Units(-) 95 Units= 855 Units (Normal Output).
Amount: Rs. 34,960 (-) Rs. 760 = Rs. 34,200 (Normal Cost).

`therefore (15 "Units"xxRs. 34,200)/(855  "Units")= Rs. 600`

(2) Calculation of Cost of Abnormal Gain in Process - Ill :
Quantity: 840 Units(-) 126 Units = 714 Units (Normal Output)
Amount:  Rs. 55,524 (-) Rs. l,260 = Rs. 54,264 (Normal Cost)

`therefore (36  "Units"xxRs. 54,264)/(714  "Units")= Rs. 2,736`