Integrated Accounting System

Integrated Accounting System is a method where financial accounting and cost accounting records are maintained together in a single unified set of books. Each transaction records both its financial effect and costing effect simultaneously, enabling complete and real-time information without duplication. It helps organizations in achieving better cost control while complying with financial reporting requirements without maintaining separate systems.

📋 Key Features:

• Single ledger system combining both financial and cost records.
• Maintaining Cost Control Accounts such as Stores, WIP, and Finished Goods.
• Integration of Cost Centers and Cost Units into financial transactions.
• No reconciliation needed between financial and cost profit.
• Preparation of Financial Statements and Cost Reports quickly and efficiently.

🎯 Functional Coverage:

• Material Purchases and Consumption recorded across production stages.
• Labour Cost Accounting linked to specific cost centers and jobs.
• Overhead Allocation and Absorption handled within departmental accounts.
• Monitoring Work-in-Progress (WIP) for valuation at different stages.
• Managing Finished Goods Production and Inventory Valuation.
• Performing Job Costing, Batch Costing, and Process Costing

🚫 Inherent Limitations:

• Independent Cost Analysis becomes challenging when deeper segregation is required.
• Adoption of Advanced Costing Techniques like ABC needs additional records.
• Recording Errors affect both financial and cost information simultaneously.
• Complex Manufacturing Processes may require supplementary costing modules.
• Cost Audits may demand detailed auxiliary working papers beyond integration.

Example Journal Entries: