Cost Reconciliation Statement | Net Loss As Per Cost Account

 

Method of Reconciliation

Reconciliation statement can be prepared by two methods.

According to financial account or cost account; both have two methods.

They are net profit or net loss.

In this way, it is prepared on four ways.

(a) Net profit as per cost account

(b) Net profit as per financial account (profit and loss account)

(c) Net loss as per cost account

(d) Net loss as per financial account (profit and loss account)

 

 

Keep In Mind (KIM)

Question can be solved as per cost account in C – F

If answer is in positive figure, it is added

If answer is in negative figure, it is less

These are exception for income and closing stock viz positive figure is less, negative figure is added.

In place of over charge in financial account, we should write down under charge in cost account.

 

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

PROBLEM: 2A

VK Metal Industries has net loss as per cost account Rs 14,250 in March.

On compression, cost and financial accounts the following facts were disclosed:

Work overhead over charged in cost account Rs 5,365.

Administrative overhead over charged in financial account Rs 9,325.

Over valuation of opening stock in financial account Rs 2,873.

Under valuation of closing stock in cost account Rs 6,540.

Internet banking charge Rs 200 recorded in financial account.

Interest on investment received in financial account Rs 3,720.

Required: Reconciliation statement of cost and financial account

[Answer: (Rs 11,023)]

SOLUTION

Given and working note:

Activities	CA	–	FA	=	Add or less
Works overhead	10,730	–	5,365	=	5,365
Administrative overhead	9,325	–	18,650	=	-9,325
Opening stock	2,873	–	5,746	=	-2,873
Closing stock	6,540	–	13,080	=	-6,540 but income
Bank charge	0	–	200	=	-200
Interest on investment	0	–	3,720	=	-3,720 but income

 

Cost Reconciliation Statement

VK Metal Industries

For the month of March

Particulars	Amount	Amount
Net loss as per cost  account		(14,250)
Add:
Work overhead over charged in cost account	5,365
Under valuation of closing stock in cost account	6,540
Interest on investment received only recorded in financial account	3,720	15,625
Less:
Administrative overhead over charged in financial account	9,325
Over valuation of opening stock in financial account	2,873
Internet banking charge only recorded in financial account	200	(12,398)
Net loss as per financial  account		(11,023)

 

 

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PROBLEMS  AND  ANSWERS  OF  COST  RECONCILIATION  STATEMENT

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

PROBLEM: 2A

The net loss shown by cost account of BN Bakery Industries is Rs 2,700

Reconciling the cost and financial accounts, following description were located:

Works overhead recovered in financial account Rs 30,000 but in cost account Rs 25,500.

Depreciation charged in financial account Rs 20,000 but in cost account Rs 24,650.

Income tax paid in financial account Rs 9,630.

Dividend income credited in financial account Rs 5,230.

Rent of godown recorded in cost account Rs 7,650

Required: Reconciliation statement of cost and financial accounts   

[Answer: Rs 700]

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

PROBLEM: 2B

MK Noodles Industries shown cost account loss Rs 9,400 for the first quarter:  

On reconciliation, following descriptions were located:

Depreciation in cost account Rs 30,000 and recorded in financial account Rs 28,000.

Income tax paid in financial account Rs 8,100.

Profit on sales of assets credited in financial account Rs 3,270.

Administrative expenses under recorded in cost account by Rs 10,000.

Goodwill written off recorded in financial account Rs 7,500.

Required: Reconciliation statement of cost and financial accounts   

[Answer: (Rs 29,730)]

 

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