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  Preparing Reconciliation Statement

Methodology for Preparing Reconciliation Statement

Reconciliation among the profits depicted through cost accounts and financial accounts is made by similar method such as is followed in the Bank Reconciliation Statement. Beginning to this statement might be made from either the profits according to the financial accounts or cost accounts. The items that are responsible for the variation among the two are either added or subtracted from the profits that are taken in the beginning. After addition or deduction, the profit as depicted by another method is arrived at. So if the beginning is made from profits like shown through cost accounts, we will reach at the profits like shown through the financial accounts and vice versa.

The following steps are to be taken for organizing this statement.

Ø   The initial point might be either profit depicted by cost accounts or financial accounts.

Ø   If the profit like taken in the beginning is get reduced because of the several reasons given, these items should be added in the profits.

Ø   If the profit as taken in the beginning is get increased because of the several reasons given, these items should be subtracted from the profits.

 After finishing point of these additions and deductions, we will reach at the profit as depicted by the other system that is if profits according to the cost accounts are taken in the beginning, we will reach at the profit as depicted through financial accounts and vice versa.

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