Page 38 - DCOM206_COST_ACCOUNTING_II

Unit 2: Reconciliation of Cost and Financial Accounting

250 machine of X type and 150 machines of Y type were manufactured and sold during the Notes
year ending 31st December 2008 at an average price of ` 2,000 and 2,500 respectively.
Prepare also a profit and loss account for the period in the financial books. The actual
works expenses for X and Y type were ` 47,000 and ` 40,000 respectively, while the actual
office expenses were ` 52,700 and 38,500 respectively. Reconcile profit figures of the two
sets of books.

Problem 1:
The cost books of a company show a profit of ` 50,000 while the net profit as per financial books
is ` 29,500. On the basis of the following information, prepare a statement remitting the two
profits for the year ended 31st March, 2007.

Particulars Cost Books (`) Financial Books (`)
Factory expenses 20,000 22,000
Office expenses 12,000 10,000
Selling and distribution expenses 8,000 7,000
Dividend received -- 5,000
Loss on sale of furniture -- 1,500
Income-tax -- 10,000
Goodwill written-off -- 5,000
Interest on capital -- 10,000

Solution:
Reconciliation Statement
for the year ending 31st March, 2007

Particulars Amount
(`)
Profit as per cost account 50,000
Add : Office expenses over-charged in cost books 2,000
Selling and distribution expenses over-charged in cost books 1,000
Dividend received not recorded in cost books 5,000 8,000
58,000
Less : Factory expenses under-charged in cost accounts 2,000
Loss on sale of furniture not recorded in cost accounts 1,500
Income tax not charged in cost books 10,000
Goodwill written-off not charged in cost books 5,000
Interest on capital not charged in cost accounts 10,000 28,500
Profit as per Financial Accounts 29,500

Problem 2:
Following is the trading and profit and loss account of Jain Traders for the year ended 31st
March, 2009:
Particulars ` Particulars `
To Material consumed 12,000 By Sale (350 units) 70,000
To Wages 4,000 By Finished stock (50 units) 3,500
To Factory expenses 12,000 By Interest received 1,500
To Administrative expenses 12,000
Contd...
To Goodwill written-off 4,000
To Discount of debentures written-off 3,000
To Net profit 28,000
LOVELY PROFESSIONAL UNIVERSITY 33
75,000 75,000