Process Costing - Dani Ki Costing - CA IPCC Video Lectures
Process Costing - Dani Ki Costing - CA IPCC Video Lectures | Process Costing - Dani Ki Costing - CA IPCC Video Lectures | Process Costing - Dani Ki Costing - CA IPCC Video Lectures | Process Costing - Dani Ki Costing - CA IPCC Video Lectures | Process Costing - Dani Ki Costing - CA IPCC Video Lectures
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Process Costing
A product has to pass through series of process to get it as a
finished product either for direct consumer consumption or for the consumption
by other manufacturing unit as an input product. Thus process costing is the
procedure of arriving at a cost of a process done on a product and to calculate
profit thereon. Closing stock of the first process becomes the opening stock of
the second one. And so on for the further processes.
Technical points in process costing are about treatment of Normal
Loss, Abnormal Loss and abnormal profit. Normal loss is generally inherent in
nature and the cost of such loss is absorbed by the good units produced in the
process. While abnormal loss is extra loss caused either naturally or the same
can be man made. Such loss is not absorbed by the goods and so such loss is
credited to the respective process account. And the total cost of abnormal loss
is debited to the profit and loss account and in case of abnormal gain it is
credited to the costing profit and loss account as it is the extra profit
earned.
In case when there are different departments and the organization
have to calculate the cost and profit of each department. For fulfilling this
purpose inter – process profits are to be calculated. To calculate inter
process profit, the output of one process is transferred to other process at
market price rather than cost, so that the profit of the transferor department
can be calculated as difference between cost and transfer price.
The advantage of inter process profit transferring is that it
becomes easy to compare between the cost and market price on completion
stage. Each process gets its own
identity. While having such advantages it also carries limitations such as it
creates complication in finding out the actual profit.
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