To determine the prices of products produced by the company, it is worthwhile for one to know the difference between cost sheet and production account. Cost sheet is a statement in which the details of expenses incurred on a particular product or job, during a specific period are presented. It is not exactly same as production account, which is nothing but an extended version of the statement of cost.
When the cost sheet is presented in the form of account, it is known as Production account, which not only provides for the cost of production but also includes the selling and distribution overheads sustained by the company.
While cost sheet can be prepared, as many times as the management of the company desires, production account can only be prepared, after the completion of the manufacturing process. Take a read of the article to understand some more distinguishing points amidst these two.
Content: Cost Sheet Vs Production Account
|Basis for Comparison||Cost Sheet||Production Account|
|Meaning||Cost sheet is a document, that provides for all the cost incurred by the company in the production of a product, during a particular period.||Production Account is a T-shaped account, that combines the features of the cost sheet and the trading and profit and loss account.|
|What is it?||It is a statement||It is a ledger account|
|Indicates||Details of production of a specific period.||Cost of any process, contract or services provided, in individual accounts.|
|Time of preparation||Before production||After production|
|Basis||Actual and Estimated figures||Actual figures|
|Double entry statement||It does not follow the rules of double entry statement.||It follows the rules of double entry system.|
|Classification of expenses||Expenses are not classified.||Expenses are classified.|
|Tenders and Quotations||It is helpful in the submission of tenders and quotations.||It does not play any role in the submission of tenders and quotations.|
Definition of Cost Sheet
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.
Cost sheet is a comprehensive statement, in which the cost components, i.e. prime cost, factory cost, production cost, the cost of goods sold, cost of sales, etc. are arranged rationally, under suitable heads. It aims at indicating the complete cost of the total output produced in a particular period. It is helpful in ascertaining the profit margin earned on the product, which in turn forms a basis for deciding the prices of similar goods.
Definition of Production Account
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.
There are three parts of a production account, in which the first part represents the cost of production, the second one shows the cost of goods sold and the last indicates the cost of sales, i.e. total cost.
Key Differences Between Cost Sheet and Production Account
The point provided below explain the important differences between cost sheet and production account:
- Cost Sheet is a document in which all the cost incurred by a company in the production of a product, during a particular period is recorded. As opposed, an account, which combines the features of the cost sheet and the trading and profit and loss account, is known as Production account.
- Cost Sheet is prepared in the form of a statement, whereas Production Account is a T-shaped ledger account.
- Cost Sheet is used to show the details of the production of a particular period. Conversely, Production Account indicates the cost of any process, contract or services provided, in individual accounts.
- Cost Sheet is prepared before the beginning of the production process. Unlike Production account which is prepared after the completion of the production process.
- The cost sheet is helpful in making a comparison of two different periods, whereas one cannot make a comparison of two periods, with the help of production account.
- Cost sheet is prepared on the basis of actual or estimated figures. In contrast, the production account is based on actual figures only.
- As cost sheet is nothing but a memorandum statement, it is not prepared as per double entry system of bookkeeping. On the other hand, production account is prepared according to the rules of double entry system.
- In cost sheet, the expenses are classified under various heads, to calculate the prime cost, factory cost and total cost. As against this, there is no classification of expenses in production account.
- In the submission of tenders, cost sheet is helpful in the preparation of cost estimate. On the flip side, production account does not play any role in the submission of tenders and quotations.
The main objective of preparation of cost sheet is to reflect the total cost and per unit cost of production, which is helpful in cost control. On the other hand, production account aims at representing sales and profit earned on the sale of goods, along with the total cost and per unit cost of production, during a specified period.