Quick answer: In an integrated accounting system, one set of books records both financial and cost transactions, so cost profit and financial profit are the same and no reconciliation is needed. In a non-integrated (interlocking or cost control) system, separate cost books are kept with control accounts and a General Ledger Adjustment Account, and the two profits must be reconciled.
| Basis | Integrated vs non-integrated |
|---|---|
| Books | Integrated: one set. Non-integrated: two sets (financial and cost) |
| Profit | Integrated: one profit figure. Non-integrated: two profits, reconciled |
| Key accounts | Stores, WIP, finished goods, wages, overhead and cost of sales control accounts; General Ledger Adjustment Account |
| Advantages | Integrated saves duplication and time; control accounts give summaries and internal check |
| Limitations | Integrated needs trained staff and careful design |
Integrated and non-integrated accounting system is part of a good accounting system.
Integrated and Non-Integrated Accounting Systems: Q&A
1. What do you understand by the integrated accounting system?
The integrated accounting system is a method of accounting for financial and costing transactions in which a single set of books records both financial and cost transactions.
2. Give any two characteristics of the integrated accounting system?
Characteristics of an integrated accounting system
- Accounting of financial and costing transactions is done in one set of books.
- In the integrated accounting system, the cost profit and financial profits are one and the same.
3. Explain the Limitations of the integrated accounting system?
Limitations of the integrated accounting system are:
- The accounting system is sophisticated and requires efficient and trained staff.
- Not suitable if separate cost and financial data are required.
- This accounting system is complicated and costly.
4. Discuss the advantages of Integrated Accounts?
The main advantages of the integrated accounting system are:
- The accounting procedure is simplified.
- In this method, transactions are not recorded twice, which saves labour, time, and money.
- There is no possibility of omission or forgetting of any business transaction in this system.
- Mechanized Accounting can be applied to this system.
5. What is the other name of the cost control account system?
The cost control account system is also called the non-integrated or interlocking accounting system.
6. What do you understand by the cost control system?
When separate books are maintained for cost and financial accounts, it is required to prepare cost control accounts for maintaining a double entry system.
Therefore cost accounts are known as cost control accounts.
7. What is a non-integrated accounting system?
It is an accounting system where separate account books are maintained to record financial and cost transactions.
8. How are many sets of account books kept in non-integral accounts?
Two sets of account books are kept in the system – one for recording financial transactions and another for recording cost transactions.
9. What are the advantages of cost control accounts?
The following are the advantages of cost control accounts:
- Control account presents detailed information recorded in memorandum account books in an abridged manner to help managers in Planning policy.
- Work can be divided among different employees, which saves time.
- Control accounts serve the purpose of internal checks too.
- It helps to prepare to cost profit and loss account.
10. What are the characteristics of the non-integrated accounting system?
Features of the non-integrated accounting system:
- Separate account books are maintained to record financial and cost transactions.
- Financial and cost accountants both are responsible to record transactions in the book separately.
- The double-entry system is adapted for recording the transactions in both accounts’ books.
- Personal and real accounts are not opened in cost account books.
- A General Ledger Adjustment Account (also called Cost Ledger Control Account) is opened in cost books to complete the double-entry system.
- A reconciliation statement is prepared to reconcile profits as revealed by cost account books and financial account books.
11. Name the principal account to be opened in cost books under the Non-integral Accounting system?
The following are the Principal Accounts:
- Stores ledger control account.
- Work-in-progress control account.
- Finished good control account.
- General ledger control account.
- Wages ledger control account.
- Factory overhead control account.
- Administrative overhead control account.
- Selling and distribution overhead control account.
- Cost of sales control account.
- Costing profit and loss account.
