1. The profit as per cost accounts is Rs.1,50,000.

The following details are ascertained on comparison of Cost and Financial

Accounts :
Cost A/c Financial A/c
Rs. Rs.
a) Opening Stocks :
Materials 10,000 15,000
Finished Goods 18,000 16,000
b) Closing Stocks :
Materials 12,000 13,000
Finished Goods 20,000 17,000
c) Interest charged but not paid 10,000
d) Write off : Preliminary expenses Rs. 500, Goodwill Rs. 1,500.
e) Dividend received from Unit Trust of India Rs. 1,000.
f) Indirect expenses charged in financial account Rs. 80,000 but Rs. 75,500 recovered in Cost Accounts.
Find out the profit as per Financial Accounts by drawing up a Reconciliation Statement.

Statement of Reconciliation for the year ended

Particulars Rs. Rs.

Profit as per Cost Accounts 1,50,000
Add:
1. Undervaluation of Opening stock of FG in FA 2,000
2. Overvalaution of Closing Stock of RM in FA 1,000
3. Dividend received appearing only in FA 1,000 4,000
1,54,000

Less:
1. Overvaluation of Opening Stock of RM in FA 5,000
2. Undervaluation of Closing stock of FG in FA 3,000
3. Interest charged only in FA 10,000
4. Writing off Goodwill and Preliminery Exp 2,000
5. Over recovery of indirect exp in FA 4,500 (24,500)

Profit as per Financial Accounts 1,29,500

2. Profit disclosed by a company's cost accounts for the year was Rs. 50,000/- whereas the net profit as disclosed by the financial
accounts was Rs. 46,000/-.
Following information is available :
a) Overheads as per cost accounts were estimated Rs.55,555/-. The charge for the year shown by the financial accounts
was Rs. 50,000/-.
b) Director's fees shown in financial accounts only Rs. 1,000/-.
c) The company allocated Rs. 2,000/- as provision for doubtful debts.
d) In financial accounts, depreciation was charged more in comparison with cost accounts by
Rs. 3,000/-.
e) Share-transfer fees received during the year Rs. 445/-.
f) Provision for Income-Tax was Rs. 4,000/-.
From the above, prepare a statement reconciling the figures shown by the cost and financial accounts.

Cost Reconciliation Statement for the year ended

Particulars Rs. Rs.

Net Profit as per Financial Accounting 46,000
Add:
1) Director’s Fees appearing only in FA 1,000
2) Provision for doubtful debts appearing only in FA 2,000
3) Depreciation overcharged in FA 3,000
4) Income tax appearing only in FA 4,000 10,000
56,000
Less:
1) Overheads overcharged in Cost Accounting 5,555
2) Share transfer fees recorded only in FA 445 (6,000)

Net Profit as per Cost Accounting 50,000

3. The net profit of the Bharat Engineering Co. appeared as Rs. 1,28,755 as per financial record for the year ended 31st
December, 2017. The cost books, however showed a net profit of Rs.1,72,400 for the same period. A Scrutiny of the figures
from both the sets of accounts revealed the following facts :
Rs.
Works Over-heads under-recovered in Cost 3,120
Administrative Overheads recovered in Excess 1,700
Depreciation recovered in Cost 12,500
Depreciation charged in Financial Accounts 11,200
Interest on Investments not included in Cost 8,000
Loss due to obsolescence in Financial Accounts 5,700
Income-Tax provided in Financial Accounts 40,300
Bank Interest and Transfer Fees (in Financial Books) 750
Stores Adjustment (Credit in Financial Books) 475
Loss due to Depreciation in Stock Values
(charged in Financial Accounts) 6,750
You are required to prepare a Profit & Loss Account (Reconciliation) Statement to reconcile both the figures of net Profits.
Also show Memorandum Reconciliation Account.

Cost Reconciliation Statement for the year ended

Particulars Rs. Rs.

Net Profit as per Financial Accounting 1,28,755
Add:
1) Under recovery of Work Ovhds in CA 3,120
2) Loss due to obsolescence recorded in FA only 5,700
3) Income tax appearing in FA only 40,300
4) Dep in stock recorded only in FA 6,750 55,870
1,84,625

Less:
1) Admn Ovhds recovered in excess in CA 1,700
2) Over recovery of Dep in CA 1,300
3) Int on Investment appearing only in FA 8,000
4) Bank Int and Transfer fees recorded only in FA 750
5) Stores Adjustment Credit appearing only in FA 475 (12,225)

Net Profit as per Cost Accounting 1,72,400

4. The Profit as per Cost Accounts is Rs.84,350. The following figures are found out on comparing Cost Account Books with
Financial Accounts Books :
Cost Accounts Financial Accounts
Rs. Rs.
a) Opening Stock - Materials 15,800 16,300
Work-in-progress 9,000 10,000
b) Closing Stock - Materials 16,000 15,000
Work-in-progress 9,000 8,000
c) Dividend and Interest received 500
d) Loss on sale of Motor Car 600
e) Rs.2,000 interest charged not considered in Financial Accounts.
f) Goodwill Rs.5,000 has been written off during the year.
g) Overheads incurred Rs.56,500 but overheads recovered amounted to Rs.60,000.
Find out profit as per financial accounts and prepare a reconciliation statement.

Particulars Rs. Rs.

Profit as per Cost Accounting 84,350
Add:
1) Dividend and Interest received recorded in FA only 500
2) Interest charged not considered in Financial Accounts 2,000
3) Over absorption of Overheads in CA 3,500 6,000
90,350
Less:
1) Over valuation of Opening stock of RM in FA 500
2) Over valuation of Opening stock of WIP in FA 1,000
3) Under valuation of Closing stock of RM in FA 1,000
4) Under valuation of Closing stock of WIP in FA 1,000
5) Loss on sale of Motor Car in FA 600
6) Goodwill written off during the year in FA 5,000 (9,100)

Profit as per Financial Accounting 81,250

Q5.
From the following information, find out profit or loss as per Financial records:
Over absorption of Selling and Distribution Overheads 3000
Over valuation of Closing Stock in cost accounts 13800
Under absorption of office and administrative overheads 24700
Loss as per cost accounts 85000
Excess Depreciation charged in Financial Accounts 4500

Particulars Rs. Rs.

Profit as per Cost Accounting (85,000)
Add:
1) Over absorption of Selling and Distribution Overheads in CA 3,000 3,000
(82,000)

Less:
1) Over valuation of Closing Stock in cost accounts 13,800
2) Under absorption of office and administrative overheads in CA 24,700
3) Excess Depreciation charged in Financial Accounts 4,500 (43,000)
Profit as per Financial Accounting (1,25,000)
Q6.

From the following information, find out profit or loss as per Cost records
Loss as per Financial records 12900
Under recovery of Depreciation in Cost Account 4,900
Notional Salary of Proprietor not considered in Financial Accounts 12,000
Overvaluation of closing stock in Financial Accounts 1200
Over absorption of factory overheads 7000

Particulars Rs. Rs.

Profit as per Financial Accounting (12,900)
Add:
1) Under recovery of Depreciation in Cost Account 4,900 4,900
(8,000)

Less:
1) Notional Salary of Proprietor not considered in Financial Accounts 12,000
2) Overvaluation of closing stock in Financial Accounts 1,200
3) Over absorption of factory overheads in CA 7,000 (20,200)
Profit as per Cost Accounting (28,200)

7. From the details given below ascertain the profit as per Financial Accounts :
CostFinancial
A/c A/c
 Opening Stock 28,00030,000
Closing Stock 32,00030,000
Interest charged but not paid – 10,000
Preliminary Expenses written off – 500
Goodwill written off – 1,500
Dividend received – 1,000
Works overhead recovered 75,50080,000
Profit 98,350

Particulars Rs. Rs.

Profit as per Cost Accounting 98,350
Add:
1) Dividend received in FA 1,000 1,000
99,350

Less:
1) Opening Stock overvalued in FA 2,000
2) Undervaluation of Closing Stock in FA 2,000
3) Interest charged in FA 10,000
4) Preliminary Expenses written off in FA 500
5) Goodwill written off in FA 1,500
6) Work overheads over recovered in FA 4,500 (20,500)
Profit as per Financial Accounting 78,850

6. The net profit of a company amounted to Rs.60,412 for the year ended 31st December, 2017 as per its financial records. The
cost records, however, revealed a different figure. A scrutiny of the 2 sets of accounts disclosed the following facts :
a) Works overhead recovered in Cost Accounts during the period amounted to Rs.28,450 while the actual amount of these
expenses was Rs. 21,390 only.
b) Actual office expenses for the period were Rs.19,850 whereas the office overhead recovered in Cost Accounts
amounted to Rs.14,500.
c) The annual rental value of premises owned by the company, amounting to Rs. 40,800 was charged in Cost Accounts
but not in Financial Accounts.
d) Selling and Distribution Expenses for the period amounting Rs.16,490 were excluded from costing records.
e) Excess depreciation charged in Cost accounts Rs. 2,400.
f) Expenses not included in Cost Account and shown in Financial Accounts :
Rs.
Interest on Bank Loan 1,600
Bank Charges 160
Director's Fees 750
Penalty due to late completion of contract 2,500
g) Gains during the year not included in Cost Accounts :
Rs.
Transfer Fees 45
Profit on Sale of Investment 4,250
h) The following appropriations had been made before arriving at the profit figure at Rs. 60,412 shown above :
Rs.
 Transfer to Dividend Equalisation Fund 10,500
Transfer to Income Tax Reserve 6,400
Transfer to Debenture Redemption Fund 9,000
i) A sum of Rs.10,000 given as donation to the prime minister's relief fund had been charged to Profit and Loss Account
as business expense.
Prepare a reconciliation statement and find the amount of net profit / loss as per costing records.

7. Modern Company Limited furnishes the summary of Trading and Profit & Loss Account for the year ended 31st December,
2017 :
Rs. Rs.
To Raw Materials 1,39,600By Sales (12,000 units) 4,80,000
To Direct Wages 76,200By Finished Stock
To Production Overheads 42,600 (200 Units) 8,000
To Administration Overheads 39,100By Work-in-Progress :
To Selling and Distribution Materials 28,200
Overheads 42,700 Wages 11,796
To Preliminary Expenses w/off 2,200 Production
To Goodwill written off 2,501 Overheads 7,999 47,995
To Dividend (Net) 3,000By Interest on Securities
To Income Tax 4,100 (Gross) 6,000
To Net Profit 1,89,994 -
5,41,995 5,41,995
The Company manufactures a Standard Unit, Scrutiny of Cost records for the same period show that :
a) Factory Overheads have been allocated to the production at 20% on Prime Cost.
b) Administration Overheads have been charged at Rs.3 per Unit on Units produced.
c) Selling & Distribution expenses have been charged at Rs.4 per Unit on units sold.
You are required to prepare a statement of cost to work out profit as per Cost Accounts and reconcile the same with that
shown in the Financial Accounts.