Question 1: Why is it necessary to reconcile the profit shown by Cost Accounts and Financial Accounts? What is the process to be adopted for their reconciliation?
Question 2: Illustrate the purpose of reconciling Cost and Financial Accounts? Indicate the possible reasons for differences between profits shown in the Cost Accounts and that shown in the Financial Accounts of a concern.
Question 3: An efficient system of costing will not necessarily produce accounts which in their results will agree with the financial accounts. Comment on the statement.
Question 4: At the end of an accounting period, it is found that the profit as illustrated by the Financial Accounts drops considerably short of the profit according to the Cost Accounts. Point out how the discrepancy might have arisen.
Question 5: Make a Memorandum Reconciliation Account from the given particulars Profit shown by cost books Rs. 30,114 and by financial books Rs. 19,760. On reconciling the given information in available:
a) Overhead absorbed in cost books Rs. 7,500 and incurred Rs. 6,932
b) Director’s fees not included in cost books Rs. 750.
c) Provision for bad debts Rs. 600.
d) A new work was taken for Rs. 12,000 and depreciation of 5% was given for only in the financial books.
e) Transfer fees Rs. 28.
f) Income tax Rs. 9,000