Page 40 - DCOM206_COST_ACCOUNTING_II

Unit 2: Reconciliation of Cost and Financial Accounting

Working notes: Notes
(1) Number of units produced = Number of units sold + Units of closing stock
= 350 + 50 = 400 units
(2) In cost accounts, closing stock is valued at cost of production, i.e. value of closing stock:
Cost of production
= × Units in closing stock
Number of units produced
40,000
=  50 = ` 5,000
50
(3) Profit as per financial accounts = 40,500 – 12,500 = 28,000
Problem 3:
The net profit of Singh Limited for the year ended 31st March, 2008 was ` 28,150 as shown by the
profit and loss account. The profit shown by the cost account, however was ` 38,500 for the same
period. A scrutiny of the figures from both sets of accounts revealed the following facts:
Works overheads under-recovered in cost books ` 600
Office overheads over-recovered in cost books ` 800

Depreciation charged in financial account ` 2,000
Depreciation charged in cost account ` 2,500
Interest on investment included in financial account ` 1,000
Obsolescence loss charged in financial account ` 2,000
Income-tax provided in financial account ` 7,000
Bank interest & dividend credited in financial account ` 200
Loss due to depreciation in stock values ` 1,350
Loss by fire ` 1,900
Prepare Reconciliation Statement reconciling the profits of two sets.

Solution:
Reconciliation Statement
For the year ending 31st March, 2008
Particulars Amount (`)
Profit as per cost account 38,500
Add: Office overheads over-recovered in cost books 800
Depreciation charged in excess in cost account 500
Interest on investment not included in cost account 1,000
Bank interest and dividend not recorded in cost account 200 2,500
41,000
Less: Works overheads under-recovered in cost books 600
Obsolescence loss not charged in cost account 2,000
Income-tax not provided in cost account 7,000
Loss due to depreciation in stock values 1,350
Loss by fire 1,900 12,850
Profit as per Financial Accounts 28,150

Working note: Practically above items are not concerned with Cost Account.

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