Cost Reconciliation Statement | Net Profit As Per Financial 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 F – C

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: 3A

The net profit of ABC Company for the year was Rs 60,000 as shown by the financial account. On an examination of financial account and cost account, the following facts were disclosed:

Selling overhead over-absorbed in cost account		1,000
Factory overhead:	Financial account	10,000
	Cost account	8,000
Depreciation charged:	Financial account	6,000
	Cost account	7,000
Interest on investment credited in financial account		4,000
Income tax paid in financial account		20,000
Opening stock:	Financial account	18,000
	Cost account	15,000

Required: Reconciliation statement between financial and cost account   

[Answer:  Rs 79,000]

SOLUTION:

Given and working note:

Activities	FA	–	CA	=	Add or less
Selling expenses	1,000	–	2,000	=	–1,000
Factory overhead	10,000	–	8,000	=	2,000
Depreciation	6,000	–	7,000	=	–1,000
Interest on investment	4,000	–	Nil	=	4,000 but income
Tax paid	20,000	–	Nil	=	20,000
Opening stock	18,000	–	15,000	=	3,000

 

 

Cost Reconciliation Statement

ABC Company

As on 31 December 200X

Particulars	Amount	Amount
Net profit as per financial  account		60,000
Add:
Factory overhead under charged in cost account	2,000
Tax paid only recorded in financial account	20,000
Opening stock under valued in cost account	+ 3,000	25,000
Less:
Selling expenses under charged in financial account	1,000
Depreciation under charged in financial account	1,000
Interest on investment only credited in financial account	4,000	(6,000)
Net profit as per cost  account		79,000

 

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

PROBLEM: 3B

Humla Fruit Jam Industries (P) Ltd has following data on 31^st December:

Particulars	Trading, P&L	Cost Sheet
Opening stock	1,60,000	1,55,000
Purchase	8,00,000	8,00,000
Closing stock	(1,20,000)	(1,10,000)
Direct wages	2,00,000	2,00,000
Works overhead	1,20,000	1,00,000
Interest on loan	5,000	–
Selling and distribution expenses	80,000	85,000
Commission paid	10,000	–
Depreciation	36,000	40,000
Dividend received	15,000	–
Net profit	1,24,000	1,30,000
Sales	14,00,000	14,00,000

Required: Reconciliation statement between financial and cost account

[Answer: CA given = Rs 1,30,000]

SOLUTION:

Given and working note:

Activities	FA	–	CA	=	Add or less
Opening stock	160,000	–	155,000	=	5,000
Closing stock	120,000	–	110,000	=	10,000 but income
Works overhead	120,000	–	100,000	=	20,000
Interest on loan	5,000	–	Nil	=	5,000
Selling and distribution	80,000	–	85,000	=	–5,000
Commission paid	10,000	–	Nil	=	10,000
Depreciation	36,000	–	40,000	=	– 4,000
Dividend received	15,000	–	Nil	=	15,000 but income

 

 

Cost Reconciliation Statement

Humla Fruit Jam Industries (P) Ltd

As on 31^st December

Particulars	Amount	Amount
Net profit as per financial  account		1,24,000
Add:
Opening stock under charged in cost  account	5,000
Works overhead under charged in cost account	20,000
Interest on loan only recorded in financial account	5,000
Commission paid only recorded in financial account	10,000	40,000
Less:
Closing stock  under charged in cost account	10,000
Selling expenses under charged in financial account	5,000
Depreciation under charged in financial account	4,000
Dividend received only credited in financial account	15,000	(34,000)
Net profit as per cost  account		1,30,000

 

 

PROBLEM: 3C

Net profit is shown by the financial account of JK Company Ltd is Rs 45,780 but cost account shows Rs 85,105. On scrutiny, the following differences were found out:

Administrative expenses under recorded in cost account Rs 15,000.

Bank interest credited in financial account Rs 3,455.

Loss by theft recorded in financial account Rs 5,780

Closing stock in cost account: Rs 50,000 and in financial account Rs 75,000.

Patents written off shown in financial account was Rs 5,000.

Notional depreciation fully depreciated in cost account Rs 8,000.

Required: Reconciliation statement between financial and cost accounting

[Answer: Rs 85,105]

SOLUTION

Given and working note:

Activities	FA	–	CA	=	Add or less
Administrative expenses	30,000	–	15,000	=	15,000
Interest credited	3,455	–	Nil	=	3,455 but income
Loss by theft	5,780	–	Nil	=	5,780
Closing stock	50,000	–	75,000	=	-25,000 but income
Patents written off	5,000	–	Nil	=	5,000
Notional depreciation	Nil		8,000	=	-8,000

 

Cost Reconciliation Statement

ABC Manufacturing Company

For the month of January

Particulars	Amount	Amount
Net profit as per financial account		45,780
Add:
Administrative expenses under charge in cost account	15,000
Loss by theft only recorded on in financial account	5,780
Closing stock  under valued in financial account	25,000
Patents written off only in financial account	5,000	50,780
Less:
Interest credited only in financial account	3,455
Notional depreciation only recorded in cost account	8,000	(11,455)
Net profit as per cost account		85,105

 

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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: 3A    

During the month of October, Sujal Confectionery (P) Ltd ascertained following differences between cost account and financial account:

Details	Financial account	Cost account
Opening stock	20,000	16,000
Direct wages	50,000	51,000
Closing stock	60,000	65,000
Scrap sold	24,000	22,000
Bad debts	10,000	–
Warehouse rent	–	8,000
Gain on sales of investment	3,570	–
Net profit	1,60,000	?

Required: Cost reconciliation statement

[Answer: Rs 152,430]

 

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

PROBLEM: 3B

Net profit as per financial account of EP Company Ltd is Rs 132,548. On scrutiny, the following differences found out:

Administrative expenses in financial account Rs 45,500 and in cost account Rs 40,000.

Interest debited in financial account 15,525.

Interest credited in financial account Rs 3,455.

Opening stock recorded in financial account Rs 35,500 and Rs 38,000 in cost account.

Closing stock recorded in financial account Rs 75,000 and in cost account Rs 68,000.

Estimating expenses recorded in cost account Rs 7,530.

Required: Reconciliation statement between financial and cost accounting

[Answer: Rs 133,088]

 

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

PROBLEM: 3C

Net profit is shown by the financial account of ABC Company Ltd is Rs 70,000. On reconciliation, the following differences were noted:

Factory overhead stated in financial account Rs 80,000 and in cost account Rs 70,000.

Administrative expenses under charged in financial account Rs 14,000.

Dividend paid in financial account Rs 16,000.

Value of closing stock stated in financial account Rs 30,000 and in cost account Rs 27,000.

Scrap sold shown in cost sheet Rs 7,475.

Transfer fee recorded in financial account Rs 2,530.

Required: Reconciliation statement between financial and cost accounting

[Answer: Rs 83,945]

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