Accumulated Depreciation On Sale Of Asset Cash Flow Statement Factory Ledger and General Ledger

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Factory Ledger and General Ledger

It is usually practical for a manufacturing concern to incorporate a factory ledger into its accounting system. Generally, this procedure is followed when manufacturing operations are remote from the head office or when the nature of such operations requires a large number of accounts.

Some accounts related to production are maintained in factory office books while others are maintained in general office books. Which accounts and other entries should be kept in the factory journal and ledger and which accounts and entries should be kept in the general journal and ledger depends on various factors and the nature of the manufacturing concern. However, there are certain accounts which are usually maintained on the factory books. These are accounts related to manufacturing costs and include stores or material accounts, labor or salary accounts, factory overhead accounts, general ledger.

Many organizations keep cash and other factory assets on general office records. Thus the general ledger includes accounts such as sales, cost of goods sold, factory plant and machinery, accumulated depreciation and liabilities etc. It also includes control account, factory ledger.

Entries related to General Ledger and Factory Ledger are first recorded in General Ledger and Factory Journal. Control Accounts Factory Ledger and General Ledger are mutually exclusive i.e. debit to one is automatic credit to the other and vice versa; They therefore allow each ledger to be self-balancing.

To check the inter-accounts (Factory Ledger Control Account in General Office Books and General Ledger Control Account in Factory Office Books), Inter Office Vouchers, also known as Transfer Vouchers, are used. Through this Inter Office or Transfer Voucher, the General Office is notified by the Factory Office; And the factory office is notified by the general office.

In a cost accounting system, the amount of accounting data that needs to be collected is usually very large. Because of this many enterprises find it advisable to keep separate books in factory offices and general offices. By establishing a separate group of factory accounts, financial accounting records are freed from much of the detail that is usually required in cost accounting work. The need to separate factory accounts from other accounting data also arises from the following factors:

a When the general or administrative offices and the factory offices are not in the same place or in the same premises or under the same roof.

b When the decentralization strategy is followed in several manufacturing plants each has its own management and administration.

In the above circumstances, it is advisable and beneficial to keep some books in the factory office and some in the general office. General offices usually maintain: all vouchers payable or accounts payable accounts, cash and accounts receivable accounts, sales and administrative accounts, etc. Manufacturing accounts relating to materials or stores, work in process, finished goods, labor and factory overhead are maintained in a factory. Offices When both the offices are involved, a mutual entry is given in the books.

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