File Name: reconciliation of cost and financial accounts problems and solutions .zip
Reconciliation of Cost and Financial Accounts is the process to find all the reasons behind disagreement in profit which is calculated as per cost accounts and as per financial accounts. There are lots of items which are shown in the profit and loss account only when we make it as per financial accounting rules. There are lots of items which are shown in costing profit and loss account only when we calculate profit as per cost accounting. A reconciliation statement is a statement which is prepared to reconcile the profit as per cost accounts with the profit as per financial accounts by suitably treating the causes for the difference between the cost and financial profit. Suppose, we have taken the profit or loss as per financial accounts, we adjust it as per cost accounts. In the end of adjustments, we see same profit as per cost accounts.
Reconciliation of cost and financial accounts mean tallying the profit or loss revealed by both set of accounts. The chief aim is to find out the reasons for the difference between the results shown by Cost Accounts and Financial Accounts. Reasons for the Difference The various reasons which create difference between cost and financial profit or loss shown by the two set of books may be listed under the following heads : 1 Items shown only in Financial Accounts 2 Items shown only in Cost Accounts 3 Absorption of Overheads 4 Methods of Stock Valuation 5 Abnormal Loss and Gains 1 Items shown only in Financial Accounts: Some items of income and expenses which are included only in financial accounts but are not shown in cost accounts and vice versa. The following items are shown in financial accounts but not in cost accounts: A Income: 1 Profit on sale of fixed assets 2 Interest received on investment 3 Dividend received on investment 4 Rent, brokerage and commission received. Expenditure: 1 Loss on sale of fixed assets, e. These expenses reduced the profit in cost account while in financial account it may be the reverse effect. If overhead charged are not equal to the amount of overhead incurred the under or over absorption of overhead leads to difference in profits of two accounts.
Reconciliation of cost and financial accounts mean tallying the profit or loss revealed by both set of accounts. Types of Problems. Base is Costing in financial Alc. Solution: Reconciliation Statement. Particulars. Profits as per Cost Accounts.
Cost accounts are maintained independent of financial accounts. These two accounts have different aims to fulfill. In the financial account, expenses are recorded in a subjective form, that is, according to their nature in a strict sense of the term. On the other hand, the cost accounts are kept in an objective form, that is, according to their purpose.
In this article we will discuss about:- 1.
In accounting , reconciliation is the process of ensuring that two sets of records usually the balances of two accounts are in agreement. Reconciliation is used to ensure that the money leaving an account matches the actual money spent. This is done by making sure the balances match at the end of a particular accounting period.
Chapter List. Reconciliation Statement. Net profit as per cost accounting. Add: Factory overhead overcharged in cost accounting. Selling expenses overcharge in cost accounting. Interest received not recorded in cost accounting.
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When cost accounts and financial accounts are maintained in two different sets of books, there will be prepared two profit and loss accounts - one for costing books and the other for financial books.Reply
Reconciliation of Cost and Financial Accounts is process to find all the reasons behind disagreement in profit which is calculated as per cost accounts and as per financial accounts.Reply