Integral accounting is a system of recording financial and cost transactions in a self-contained ledger, called an integrated ledger. It implies the maintenance of only one set of books for both financial and cost accounts.
This system helps in ascertaining marginal cost, variances, abnormal loss and profit. It also helps in preparation of Profit and Loss Account and Balance Sheet as per the requirements of law. It provides detailed information about the cost of each product, job, process or operation. It also helps the management to control the liabilities and assets of the business.
Content
- Introduction to Integrated Accounting
- Meaning of Integrated Accounts
- Features of Integral Accounts
- Process of integration of cost and financial accounts
- auxiliary laser
- Principles to be considered while designing an Integrated Accounting System
- Integrated accounting requirements
- Unified Accounts Prerequisites
- planning to enter
- accounting entries
- stock valuation problem
- make third entries
- Benefits of Integrated Accounting
- Benefits of Integrated Accounting
- Disadvantages of Integrated Accounting
- Limitations of Integrated Accounting
Integrated Accounting: Meaning, Features, Principles, Requirements, Accounting Entries, Making Third Entries, Profit, Advantages, Limitations, Problems and Examples…
Integrated Accounting - Introduction
Integral accounting is a system of recording financial and cost transactions in a self-contained ledger, called an integrated ledger. It implies the maintenance of only one set of books for both financial and cost accounts.
Since both financial and cost accounts use data from the same record relating to income and expenditure, it would be useful to combine the two and avoid problems of integration such as unnecessary clerical effort, wastage of time, duplication of effort etc.
Integrated accounting system refers to a single accounting system, where cost and financial accounts are maintained in a single set of books of accounts on the basis of double entry system. Such a system provides a complete set of information required by cost and financial accountants.
Transactions are classified functionally and by their nature, for example, purchases are analyzed by the nature of the material and its end use. This eliminates the operation of the cost ledger control account in the financial ledger and the general ledger adjustment account in the cost ledger. Personal accounts and real accounts are maintained and nominal accounts follow the principles of cost accounting system.
Purchase account is terminated and posting is done directly to Store Control, WIP or Overhead Account. Similarly the payroll account is abolished and postings are made directly to the wage control account and overheads.
This system helps in ascertaining marginal cost, variances, abnormal loss and profit. It also helps in preparation of Profit and Loss Account and Balance Sheet as per the requirements of law. It provides detailed information about the cost of each product, job, process or operation. It also helps the management to control the liabilities and assets of the business.
Meaning of Integrated Accounts
The term "integral accounts" pertains to a single accounting system. Only one set of books is kept, a profit figure is generated, and the information from the financial book is used for both financial and managerial purposes. Hence there is no need for operation of cost account control accounts and reconciliation of cost and financial accounts.
The Chartered Institute of Management Accountants, London, defines it as "a system in which the financial and cost accounts are interconnected to ensure that all relevant expenses are contained in the cost accounts".
An accounting system in which cost and financial accounts are kept in the same set of books is called an integrated (or integral) accounting system. This system avoids the need for separate sets of books for cost and financial purposes. The accounts are designed in such a way that complete information required for cost as well as financial accounting purposes is available from the same set of books.
All transactions are classified functionally as well as by their nature. For example, procurement is analyzed by the nature of the material and its end use. Purchases Account is closed and Stores Control Account, Overhead Account, Work Progress Account and all such accounts necessary to meet the cost requirements are opened in the same set of books. Payroll is analyzed directly into the direct labor and overhead accounts.
Functional classification enables the firm to ascertain the cost (with necessary analysis) of each product, job, process, operation or any other identifiable activity. It also ensures to ascertain marginal costs, variances, abnormal losses and abnormal profits. In fact, all the information required by a system of cost accounting is provided to the management to perform its work properly.
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