Difference between a Production Account and a Cost Sheet18th July 2021 1 By indiafreenotes
Production Account is an account created under unit costing, which exhibit, the product produced, total cost of sales and the per unit cost incurred during the given period.
Production Account is something that integrates into itself, the components of cost sheet and the trading and profit and loss account. It not only includes the total cost of production but also accounts for the selling and distribution overheads.
- It consists of four parts. The first part gives prime cost, second part gives cost of goods manufactured, third part shows gross profit and fourth part shows net profit.
- It is based on double entry system.
- It shows the cost in aggregate and thus facilitates comparison with other financial accounts.
- It is prepared in the form of an account.
- It is not useful for preparing tenders and quotations.
- Expenses are not classified in this account.
- It is based on actual figures of expenses.
- No comparison in possible due to non-availability of previous year’s figures.
- It is prepared for each production department.
Cost sheet can be described as a statement of cost expended or to be expended, by the company in connection to the cost unit or cost centre, for a definite period or level of activity. It exhibits both cost per unit of production and total cost. Simply put, a cost sheet is a periodical statement, which accounts for the all the cost of a cost centre.
- It presents the elements of cost in a classified manner and the cost is ascertained at different stages such as prime cost, works cost, cost of production, cost of goods sold, cost of sales and total cost.
- It is not based on double entry system.
- It shows the cost in detail and analytical manner which facilitates comparison of cost for the purpose of cost control.
- It is prepaid in the form of a statement.
- Estimate cost sheets can be prepared on the basis of actual cost sheets and these are useful for preparing tenders and quotations.
- Expenses are classified to ascertain different divisions of cost as prime cost, works cost, total cost etc.
- It is based on actual and estimated figures of expenses.
- Figures of previous year are provided to enable comparison.
- It is prepared for each job and sometimes for the whole factory also.
|Form||It is prepared like an account||It is prepared in the form of a statement.|
|Double entry||It is based on double entry system and there are debit and credit side.||It is not based on double entry system.|
|Period||It is prepared after completion of production.||It is prepared with a view ascertain total-cost as well as per unit cost of production.|
|Comparative study||Such comparative study is not possible in these methods.||Comparative study for two periods or two type of production is feasible.|
|Comparison with financial accounts||Results can be compared with financial account’s results.||Results cannot be compared with financial account’s results.|
|Cost analysis||Different items of cost are shown as totals and are not analyzed.||Detailed analysis of cost is made to control different elements of cost, viz. material, labor and expenses.|