Reconciliation of Cost and Financial Accounts Question Answer
1. Why cost and Financial Accounts are Reconciled?
Answer: Cost and financial accounts are reconciled to verify the accuracy of both the accounts.
2. What is the object of Reconciling cost and Financial accounts?
- To know the reasons for the difference.
- know the situation of under absorption and over absorption of overhead.
- To check the mathematical mistake.
3. What is memorandum Reconciliation Accounts?
Answer: Memorandum reconciliation account is basically a presentation of reconciliation statement in T account form balance of this account is termed as profit as per the financial book and shown on the debit side of this account.
4. Why the cost accounts and financial accounts show a different profit?
Answer: The difference between costing profit & financial profit is on account of their difference in the object of preparing account.
5. Explain two reasons for the difference in profit as per cost books and financial books?
- It may be due to under/ over-absorption of overhead.
- It may be due to the difference in the valuation of opening/ closing stock in both books.
6. State any four items of expenses which are included in financial accounts but not in cost account?
Answer: The items which are included only in financial accounts are:
- income tax.
- the dividend.
- interest on investment, and bank deposit.
7. State any two items which are included in cost accounts but not in financial accounts?
Answer: Two items in cost books only are national rent of self-occupied house and national interest on own capital.
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8. Give the causes of difference between costing profit and financial profits?
Answer: Reasons for difference in profit are:
- The difference in overhead.
- The difference in valuation of stock of raw materials, work in progress finished goods.
- The difference in depreciation.
- Abnormal losses or profits in production and abnormal idle time.
- Items not included in cost books as follows: the appropriation of profit and, purely financial items such as interest, penalty, donation etc.
- Items included in cost accounts only such as notional rent, interest on owned capital and salary of the entrepreneur.
9. How is stock of finished goods valued in financial accounts and ost accounts?
Answer: In cost book, only prime cost and factory overhead are considered for valuation of stock while in financial accounts it is valued at total cost of production I.e in addition to work costs office overhead are also included hence it is necessary to adjust it while preparing reconciliation statement.
10. Explain the valuation of stock in financial and cost accounts?
Answer: In financial accounts stock are valued at cost price or market price whichever is less while is cost accounting it is shown only at its cost price.
Reconciliation of Cost and Financial Accounts questions answers