NON INTEGRATED ACCOUNTING SYSTEM

NON-INTEGRATED ACCOUNTING SYSTEM

• It is a system of accounting under which separate ledgers are maintained for cost and financial accounts by Accountants. This system is also referred to as cost ledger accounting system. Under such a system the cost accounts restrict itself to recording only those transactions which relate to the product or service being provided.
•  Hence items of expenses which have a bearing with sales or, production or for that matter any other items which are under the factory management are the ones dealt with in such accounts. This leads to the exclusion of certain expenses like interest, bad debts and revenue/income from ‘other than the sale of product or service’. 
• A special feature of the non-integrated system of accounts is its ability to deal with notional expenses like rent or interest on capital tied up in the stock. The accounting of notional rent facilitates comparisons amongst factories (some owned and some rented). 
• Non-Integrated Accounting Systems contain fewer accounts when compared with financial accounting because of the exclusion of purchases, expenses and also Balance Sheet items like fixed assets, debtors and creditors. 
• Items of accounts which are excluded are represented by an account known as Cost ledger control account. 

The important ledgers to be maintained under non-integrated accounting system in the Cost Accounting department are the following:

(a) Cost Ledger - This is the principle ledger of the cost department in which impersonal accounts are recorded. This ledger is made self-balancing by maintaining therein a Control Account for each subsidiary ledger.

(b) Stores Ledger - It contains an account for each item of stores. The entries in each account maintained in this ledger are made from the invoice, goods received note, material requisitions, material received note etc. Accounts in respect of each item of stores show receipt, issue and balance in physical as well as in monetary terms.

(c) Work-in-Process Ledger - This ledger is also known as job ledger, it contains accounts of unfinished jobs and processes. All material costs, wages and overheads for each job in process are posted to the respective job account in this ledger. The balance in a job account represents total balance of job/work-in-process, as shown by the job account.

(d) Finished Goods Ledger - It contains an account for each item of finished product manufactured or the completed job. If the finished product is transferred to stores, a credit entry is made in the work-in-process ledger and a corresponding debit entry is made in this ledger.