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Differences Between Process Costing and Job Costing


Process Costing

Process costing means finding out the cost of product at each process or stages of the production. 

Job Costing 

Job costing is a method of cost ascertainment in industries engaged in different jobs. Under this method, costs are collected and accumulated for each job or operation or project separately. 

Process Costing                                                             Job Costing

In the process costing, the production is a                  Under job costing, production is carried out

continuous flow and the products are being                as against the specific orders.


Each and every process is related to another              Each job is separate and independent.

process. So, products lose their individuality.

Costs are calculated at the end of the specific           Costs are calculated when a particular job is

cost period completed.

Cost of one process being transferred to the              Here, there is no transfer of costs from one

next process is a usual feature.                                            job to another.

Normally, the production is continuous so there        There may or may not be work in progress

is work in progress at the beginning and at                     at opening or closing in an accounting

closing.                                                                                           period.

Production is standardized and stable, therefore       Cost control is comparatively more difficult

control is easier.                                                                        because each job needs more managerial


Process Cost Accounting Procedure 

(i)                 Prepare separate account for each process. It is called process account.

(ii)               All the direct and indirect expenses are debited to the respective processes.

(iii)             Input (Raw material) introduced are entered in the first process account.

(iv)              The total cost of one process is transferred to the next process as an initial cost till the production is completed.

(v)                If any Normal Loss, Abnormal Loss, Normal Gain and Abnormal Gain arises, it should be treated properly. 

Specimen Form of Process I A/c

Specimen Form of Process D A/c  

Specimen Form of Process III A/c


Process Losses

The Process Losses can be classified into (i) Normal process Loss, (ii) Abnormal process Loss. 

Normal Process Loss. The amount of loss which is unavoidable on account of inherent nature of production. This loss is quite expected under normal conditions.

Normal Loss is generally calculated as a certain percentage of input. But sometimes, such a loss is due to loss of weight, say due to evaporation or other action. In this regard, such wastage is not physically present, obviously it cannot have any value. But, anyhow, normal loss is physically present in the form of scrap; it may have some value, so it should be credited to the process account.

Abnormal Process Loss. Any loss arising due to any of the unforeseen factors, which is over and above the Normal Loss is termed as Abnormal Loss. It arises due to carelessness, machine breakdown, use of defective material and so on.

Simply, Actual Loss is more than the estimated normal loss and the difference may be categorised as Abnormal Loss. Abnormal Loss account is debited with the quantity and the cost therefore process account is credited.

(i) Formula For Abnormal Loss 

Normal Cost of Normal Production / Normal Output *  Units of Abnormal Loss 

 (ii) Abnormal Gain

Abnormal gain arises when the actual loss is less than the estimated normal loss and the difference may be treated as abnormal gain.

Normal Cost of Normal Output / Units of Normal Output * Units of Abnormal Gain 

(iii) Value of Abnormal Wastage

Normal Cost of Normal Output / Normal Output * Abnormal Loss