Intermediate: Accounting entries for a standard costing system

(a) Show by journal entries (narrations are NOT required) how the following transactions would be accounted for within the integrated accounting system of E Limited which uses standard prices for materials. The price variance is isolated on purchase.

October 1 E Limited bought and received 1000 kilograms of raw material AB from 0 Limited for £5500. The standard price of material AB was £5 per kilogram.

3 400 kilograms of material AB were issued to production.

6 20 kilograms of material AB were accidentally knocked off a she~ in the stores, the spilled contents were unusable and had no scrap value.

8 200 of the 400 kilograms issued to production on 3 October were found to be sub-standard and returned to the stores with a material returns note. These 200 kilograms were immediately returned to 0 Limited.

Replacements were issued to production with additional requirements against a requisition note for 300 kilograms.

(12 marks)

(b) 'An integrated accounting system is superior to a nonmtegrated system.·

You are required to comment on the above statement, demonstrating that you understand the difference between the two systems, and explain two advantages and two limitations of an integrated system.