RECONCILIATION OF COST AND FINANCIAL ACCOUNTS

Problem 1
From the following figures, prepare a reconciliation statement:
₹
Net profit as per financial books 63,780
Net profit as per costing books 66,760
Factory overheads under-recovered in costing books 5,700
Administration overheads recovered in excess in costing books 4,250
Depreciation charged in financial books 3,660
Depreciation recovered in costing 3,950
Interest received but not included in costing books 450
Income-tax provided in financial books 600
Bank interest credited in financial books 230
Stores adjustment credited in financial books 420
Depreciation of stock charged in financial accounts 860
Dividends appropriated in financial accounts 1,200
Loss due to theft and pilferage only in financial books 260

Problem 2:
ABC Ltd. Is maintaining separate set of books for Cost and Financial Accounts. The net profit for
the year ended 31st March, 2016 as per Financial Accounts amounting to ₹ 12,08,240. On
verification of both the accounts the following discrepancies are disclosed:
1) The Cost Accounts have taken into account an amount of ₹ 2,16,000 as notional rent of
company’s own building and premises.
2) Factory overheads recovered in Cost accounts during the period amounted to ₹ 5.69,000.
But the actual expenses incurred during the period amounted to ₹ 4,27,800.
3) The actual administrative overhead for the period was ₹3,97,000 and the recovered amount
in Cost Accounts was ₹2,90,000.
4) Selling expenses of ₹3,29,800 was only charged in Financial Accounts.
5) Depreciation provided in: Financial Accounts ₹8,00,000; Cost Accounts: ₹8,48,000
6) The following receipts are not included in Cost Accounts:
Interest on investment ₹1,89,000
Profit on sale of machinery₹85,000
Transfer fees ₹900
7) The expenses charged in Financial Accounts but were not included in Cost Accounts. (₹)
Interest on bank loan 35,200
Fines and penalties 65,000
Donations 50,000
Goodwill written off 1,50,000
8) The following appropriations had been made before arriving at a profit figure of ₹12,08,240
shown above. (₹)
Transfer to Income-tax reserve 1,28,000
Transfer to Debenture redemption reserve 1,80,000
Transfer to Dividend equalization reserve 2,10,000
From the information given above, prepare reconciliation statement and ascertain profit as
per Cost accounts for the period.

Problem 3:
R Limited showed a net loss of ₹35,400 as per their cost accounts for the year ended 31.03.2021.
However, the financial accounts disclosed a net profit of ₹67,800 for the same period. The following
information was revealed as a result of scrutiny of the figures of cost accounts and financial
accounts:
(₹)
(i) Administrative overheads under recovered 25,500
(ii) Factory overheads over recovered 1,35,000
(iii) Depreciation under charged in Cost Accounts 26,000
(contd.)
 (iv) Dividend received 20,000
(v) Loss due to obsolescence charged in Financial Accounts 16,800
(vi) Income tax provided 43,600
(vii) Bank interest credited in Financial Accounts 13,600
(viii) Value opening stocks:
In Cost Accounts 1,65,000
In Financial Accounts 1,45,000
(ix) Value of closing stocks:
In Cost Accounts 1,25,500
In Financial Accounts 1,32,000
(x) Goodwill written-off in Financial Accounts 25,000
(xi) Notional rent on own premises charged in Cost Accounts 60,000
(xii) Provision for doubtful debts in Financial Accounts 15,000

Problem 4:
The net loss of Waywell Ltd. appeared at ₹1,18,500 as per cost records for the year ending
31.03.2021. The following information was revealed as a result of scrutiny of the figures of the
financial and cost records:
(₹)
Factory overheads over absorbed in cost accounts 32,500
Administrative overheads under absorbed in cost accounts 38,250
Depreciation charged in financial accounts 4,55,800
Depreciation recovered in cost accounts 4,99,700
Loss due to obsolescence charged in financial accounts 11,400
Income tax provision made in financial accounts 32,650
Interest on investments not included in cost accounts 96,000
Stores adjustment (Credit) in financial accounts 12,800
Value of opening stock in: Cost accounts 18,85,600
Financial accounts 19,62,500
Value of closing stock in: Cost accounts 21,15,800
Financial accounts 21,98,900
Imputed rent charged in cost accounts 1,80,000
Selling and distribution expenses not charged in cost accounts 72,450
Donation to prime Minister’s Relief Fund 11,000
Loss on sale of furniture 7,250
Bad debts written off 18,300
Prepare reconciliation statement and arrive at the profit or loss as per financial accounts.

Problem 5:
The Trading ad profit & Loss Account of a company for the year ended 31.03.2021 is as under:
Trading and Profit & Loss Account
(₹) (₹)
To Materials 26,80,000 By sales (50,000 units) 62,00,000
To Wages 17,80,000 By Closing Stock (2,000 units) 1,50,000
To Factory Expenses 9,50,000 By Dividend Received 20,000
To Administrative Expenses 4,80,200
To Selling Expenses 2,50,000
To Preliminary Expenses written off 50,000
To Net profit 1,79,800
63,70,000 63,70,000
In the Cost Accounts:
i. Factory expenses have been allocated to production at 20% of Prime Cost.
ii. Administrative expenses absorbed at 10% of Factory Cost.
iii. Selling expenses charged at ₹10 per unit sold.

Prepare the Costing Profit & Loss Account of the company and reconcile the Profit/Loss with the
profit as shown in the Financial Accounts.