Process costing account for single product with no loss or gain: introduction; general steps; accounting treatment and examples

1.1 Introduction

How do we prepare process costing accounts for a case of single product where NO normal, abnormal loss and abnormal gain has come up respectively? As a student, and even as a scholar you think this is hard to understand or grasp with your mind. No, this task is easy. To successfully prepare the respective accounts, the following steps will aid you on how to prepare such accounts where by the process involves production of one main product.

General steps of accounting for single product process costing

2.1 Introduction

The following step-by-step approach demonstrates how to prepare such accounts;

Step 1: Open the “first Process one Account” and post the input items as supposedly.

In this step, consider recording all the monetary value of direct materials, direct labor, direct expense and indirect production costs on the debit side of the process one account.

Step 2: Add the monetary debit totals for all the inputs therein.

Once all the debit entries have been made, sum up the totals and to establish the total cost of producing the completed units.

Step 3: Determine the closing balance of the current process account

In step 3 first, compute the average cost for one unit of the product completely produced.

The computed cost per unit is the cost per unit to be used to balance the two sides of the cost account. Use balance carried down (bal. c/d) approach as usual.


The formula below will guide you on how to determine the cost per unit (i.e., average cost) of the completed units to be transferred to the proceeding process account

NB1: That the total cost of the finished products in the current account becomes the opening direct input for process two and so on and so on. It is further assumed to be 100 percent complete (see equivalent unit concept).

NB2: Good output in this case is the expected output. Now that there is NO loss or gain expected, then it means that the actual output gotten is the same as good/expected output.

Step 4: Open the Second Process Account

In this step 4, consider posting total cost from process one account on the debit side of the process two account.

Then add the additional direct raw materials, labor and indirect costs associated to process two account.

Step 5: Add again the debit monetary totals for all the inputs therein.

Once all the debit entries have been made, sum up the totals and to establish the total cost for complete units in process two.

NB: That step 5 is a repeat of step 2 and 3 above which you need to undertake until the final product is transferred to stores ready for consumption.

Accounting treatment of input entries in the process account

3.1 Introduction

The following accounting entries demonstrates how to prepare process accounts;

i). When first process account is opened and inputs are posted therein, their details are as follows

NB: Remember that DR process 1 account with all the inputs is in other words opening the account and the corresponding CR entries are made on the respective accounts to close them down.

ii). When second process account is opened and inputs are posted there in, their details are as follows

NB: When you open process 2 account, it is first debited with the total cost from previous process 1 account which is assumed to be 100% complete. Then other direct and indirect input entries are made whereby the corresponding credit entries on the other side will be made to close those accounts.

iii). When final product is produced ready for storage/sale


Double NN manufacturers co. ltd produces milk products. One of the most common such products is mukaathimo which undergoes three processes, namely process 1, 2 and 3. After these processes, the final product is stored in deep freezer cooling system. 3,000@$6.25 units of initial direct materials were introduced in process 1. The following information was obtained in respect of the product aforementioned as per the production schedule of the month of March 2022.

Production overhead is absorbed by each process at a multiplication factor of 1.5 of direct labor. All the materials were processed to the level of complete units and there was no Work in Progress (WIP).


Prepare process 1, 2 and 3 and finished goods accounts. Show all the details


About the Author - Dr Geoffrey Mbuva(PhD-Finance) is a lecturer of Finance and Accountancy at Kenyatta University, Kenya. He is an enthusiast of teaching and making accounting & research tutorials for his readers.