Scribd
Upload
14 views

Process Costing Part C Theory

This document discusses process costing and inter-process profit. It explains that the output of one process is transferred to the next process at a transfer price that includes a profit percentage. This results in unrealized profit being included in the stock values. The document outlines how to calculate transfer prices, inter-process profit, unrealized profit in stock, and the actual realized profit. It also introduces the columnar process account format used to track total cost, actual cost, and profit for each process.

Uploaded by

harshnagar147
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
14 views

Process Costing Part C Theory

This document discusses process costing and inter-process profit. It explains that the output of one process is transferred to the next process at a transfer price that includes a profit percentage. This results in unrealized profit being included in the stock values. The document outlines how to calculate transfer prices, inter-process profit, unrealized profit in stock, and the actual realized profit. It also introduces the columnar process account format used to track total cost, actual cost, and profit for each process.

Uploaded by

harshnagar147
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 5

B COM SEMESTER 5

COST & FINANCIAL ACCOUNTING

PROCESS COSTING: PART C

Dr Manisha Bhavsar
Associate Professor in Accountancy
H L College of Commerce
Process Costing: Part C
• Understand the terms inter-process profit and unrealized profit in
stock
• Calculate the transfer price inclusive of inter-process profit
• Find out the cost of process stocks in case of inter-process transfer of
profit
• Determine the actual realized profit
• Calculate the value of stocks to be shown in the Balance Sheet

Dr Manisha Bhavsar, HLCC 2


Inter-Process Profit
• Output of the process is transferred to the next process not at COST
but at a TRANSFER PRICE
• Transfer Price = Cost of that Process + Profit
• The profit added is called Inter-Process Profit
• Each process adds a certain percentage of profit when it transfers the
output to the next process
• Input of Process 2 will include the profit of Process 1
• Input of Process 3 will include the profit of Process 1 & 2
• Finished Goods Stock will include the profit of all processes
Dr Manisha Bhavsar, HLCC 3
Unrealized Profit in Stock
• Input of a process includes the profit of all previous processes
• Hence, Cost of a process includes the profit of previous processes
• Closing stock in the process, when valued at the cost of that process,
will include the profit of all the previous processes
• Profit included in the value of stock is called Unrealized Profit in Stock
• We need to calculate the COST of the stock to be shown in the B/S
• Unrealized Profit in Stock = Value of stock – Cost of stock
• Columnar Process Accounts with three columns viz. Total, Cost and
Profit facilitate the above calculations

Dr Manisha Bhavsar, HLCC 4


Process Account (Format)
Total ₹ Cost ₹ Profit ₹ Total ₹ Cost ₹ Profit ₹
To Op Stock -- -- --
To Transfer from
By Transfer to
previous -- -- -- -- -- --
next Process
Process
To Dir Material -- -- --
To Dir Wages -- -- --
-- -- --
- Closing Stock (--) (--) (--)
Prime Cost -- -- --
To Overheads -- -- --
Total Cost -- -- --
To P&L A/c -- -- --
-- -- -- -- -- --

Dr Manisha Bhavsar, HLCC 5

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy