1 / 16

ACCOUNTING FOR OVERHEADS

ACCOUNTING FOR OVERHEADS. BY- Dr. Kamlesh Khosla M.com, M.A.(Eco.), PH.D PG Diploma in PMIR & PG Diploma in Journalism and Mass Communication . INTRODUCTION.

zuwena
Download Presentation

ACCOUNTING FOR OVERHEADS

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. ACCOUNTING FOR OVERHEADS BY- Dr. Kamlesh Khosla M.com, M.A.(Eco.), PH.D PG Diploma in PMIR & PG Diploma in Journalism and Mass Communication

  2. INTRODUCTION Accounting of Overheads is one of the most important & technical aspect of Cost accounting. From Cost reduction & Cost control point of view, overhead play a great role. So, proper understanding of computation and accounting of overhead is must for Students of commerce.

  3. Meaning of OVERHEADS??? • Overheads is the aggregate of indirect materials cost, indirect labour cost and indirect expenses which cannot be conveniently identified with and directly allocated to a particular cost centre or cost object. Example- Indirect Material Cost Indirect Labour Cost Indirect Expenses

  4. Distribution Of Overheads Step 1 -> Classification of Overheads Step 2 -> Collection of Overheads Step 3 -> Allocation of Overheads Step 4 -> Apportionment of Overheads Step 5 -> Re-apportionment of service department overheads Step 6 -> Absorption of Overheads

  5. Classification Of Overheads

  6. Collection of Overheads • Collection of overheads means the collection of various items of overheads under suitable account heading and a unique Standing Order Number(S.O.N.) or Cost Account Number(C.A.N.). Sources -> Material Requisitions -> Wages analysis Book -> Invoices -> Cost Journal -> Subsidiary Records

  7. Allocation Of Overheads

  8. Apportionment of overheads • It is the process of charging the proportion of common items of cost to two or more cost centres on some equitable basis. PRINCIPLES FOR APPORTIONMENT OF OVERHEADS • Actual Benefit • Potential Benefit • Ability to pay • Specific Criteria/Survey method

  9. Basis Of Apportionment

  10. Secondary Distribution Of Overheads It means the apportionment of overheads of service departments among the production departments on some suitable basis. METHODS • On Non Reciprocal Basis/Step ladder method • On Reciprocal Basis- • Simultaneous Equation Method • Repeated Distribution Method • Trial & Error Method

  11. Methods Of Absorption Of Overheads Overhead Absorption Rate = Total overheads of cost centre/ Total Quantum of base METHODS • Percentage Of Direct Material Cost • Percentage of Direct Labour Cost • Percentage of Prime Cost • Direct Labour Cost • Machine Hour Rate • Rate Per Unit Of Production

  12. Percentage of Direct Material Cost Factory Overhead Rate = Amount of Production overheads/ Direct Cost Material x 100 • Percentage Of Direct Labour Cost Factory Overhead Rate = Amount Of Production Overheads/ Direct Labour Cost x 100 • PercentageOf Prime Cost Method Factory Overhead Rate = Amount Of Production Overheads/ Prime Cost x 100

  13. Direct Labour Hour Rate Factory Overhead Rate = Amount Of Production Overheads/ Direct Labour Hours • Machine Hour Rate Factory Overhead Rate = Amount of Production Overheads/ Machine Hours • Rate Per Unit Of Production Factory Overhead Rate = Amount Of Production Overheads/ No. of Units of Production

  14. Computation Of Machine Hour Rate

  15. THANK YOU !!!

More Related