Page 133 - BA2 Integrated Workbook - Student 2017

Integrated accounting systems

Recording variances in the ledgers

5.1 General rules for recording variances

 Variances are entered in the accounts at the point at which they arise

 The materials price variance is recorded in the materials control account.

 The labour rate variance is recorded in the wages control account.

 The ‘quantity’ variances, that is, material usage, labour efficiency and variable
production overhead efficiency, are recorded in the work in progress account.

 The variance for variable production overhead expenditure is usually recorded
in the production overhead control account.

 Sales values are usually recorded at actual amounts and the sales variances
are not shown in the ledger accounts.

5.2 Variance accounts

The amount of the variance is recorded in the relevant variance account:

a debit for an adverse variance and
a credit for a favourable variance

Ledger accounts are usually kept for each cost variance.

Illustration 5

TYU 8

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