Subject: Cost Accounting Topic: Reconciliation of Cost and Financial Accounts By: Questionscastle Academic Team

Document Code: CA/IPCC/CST/00013

Q 1.

From the following figures prepare a statement reconciling the profits as per the cost accounts and the profits as per the financial accounts: ` Net profits as per the financial accounts 1,28,755 Net profits as per the cost accounts 1,72,400 Works overheads under-recovered 3,120 Administrative overheads over-recovered 1,700 Depreciation charged in the financial accounts 11,200 Depreciation charged in the cost accounts 12,500 Interest received but not included in the cost accounts 8,000 Loss due to obsolescence charged in the financial accounts 5,700 Income tax provided in the financial accounts 40,300 Stores adjustment credited in the financial accounts 475 Depreciation of stock charged in the financial accounts 6,750 Bank interest credited in the financial accounts 750 The financial records of Manufacturers Ltd. reveal the following for the year ended 30-6-2005: ` Sales (20,000 units) 4,000 Materials 1,600 Wages 800 Factory Overheads 720 Office and administrative Overheads 416 Selling and distribution overheads 288 Finished Goods (1,230 units) 240 WIP: Materials 48 Labour 32 Factory O/H 32 112 Goodwill written off 320 Interest on capital 32 In the Costing records, factory overheads is charged at 100% wages, administration overhead 10% of factory cost and selling and distribution overhead at the rate of `16 per unit sold. Prepare a reconciliation statement. M/s Hind Ltd. showed a net loss of `4,16,000 as per their financial accounts for the year ended 31st Mar ,1999. The cost accounts, however, disclosed a net loss of `3,28,000 for the same period. The following information was revealed as a result of difference in figures of both sets of accounts: ` Factory Overheads under recovered 6,000 Administration overheads over recovered 4,000 Depreciation charged in financial accounts 1,20,000 Depreciation recovered in costs 1,30,000 Interest on investment not included in cost accounts 20,000 Income tax provided 1,20,000 Transfer fees (credit in financial books) 2,000 Stores adjustment (credit in financial books) 2,000 Prepare a Memorandum Reconciliation Account. The following is summarized Trading and Profit & Loss account of XML Ltd., for the year ended 31st Mar 1999: Particulars Particulars ` ` Materials Consumed 7,08,000 Sales (30,000 units) 15,00,000

Q 2.

Q 3.

Q 4.

Direct Wages Works Overheads

Administration O/h Selling and distribution O/h Net profits

3,71,000 Finished Stock(1000 units) 2,13,000 Work in progress: Materials 17,000 Wages 8,000 Works O/H 5,000 95,500 1,13,500 69,000 15,70,000

40,000

30,000

15,70,000

The companys cost records show that in course of manufacturing a standard unit: Works overheads have been charged @ 20% on prime cost. Administration overheads have been recovered at `3 per finished unit, and Selling and distribution overheads have been recovered at `4 per unit sold. The under absorbed overheads have not been adjusted in Costing P&L account. Prepare: 1. Costing Profit and Loss account indicating net profits, and 2. A statement reconciling the profits as disclosed by the cost accounts and shown in the financial accounts. Q 5. The financial books of a company reveal the following data for the year ended 31st Mar 2002: ` Opening Stock: Finished goods 875 units 74,375 Work in progress 1.04.01 32,000 Raw Materials consumed 7,80,000 Direct Labour 4,50,000 Factory Overheads 3,00,000 Goodwill 1,00,000 Administrative Overheads 2,95,000 Dividend paid 85,000 Bad Debts 12,000 Selling and distribution overheads 61,000 Interest received 45,000 Rent received 18,000 Sales (14,500 units) 20,80,000 Closing Stock: Finished goods 375 units 41,250 Work in progress 38,667 The cost records provide as under: Factory overheads are absorbed at 60% direct wages Administrative overheads are recovered at 20% factory cost Selling and distribution overheads are charged at `4 per unit sold Opening stock of finished goods is valued at `104 per unit The company values work in progress at factory cost for both the financial and cost accounts. Required: (i) Prepare statements for the year ended 31st Mar 2002 to show - The profits as per financial records - The profit as per costing records (ii) Prepare a statement reconciling the profit as per costing records with the profit as per financial records. ABC Ltd. had furnished you the following information from the Financial books for the year ended 31st Mar 2005: (See next page) Profit and loss account for the year ended 31st Mar 2005 Particulars Particulars `

Q 6.

Opening stock of finished goods: 500 units @ `17.50 each Materials consumed Wages Gross profit c/d Factory Overheads Administration overheads Selling expenses Bad debts Preliminary Expenses Net Profit

Sales (10,250 units) Closing stock of finished 8,750 goods: 1,30,000 250 units @ `25 each 75,000 1,51,250 3,65,000 47,375 Gross Profit c/d 53,000 Interest 27,500 Rent received 2,000 2,500 24,000 1,56,375

3,58,750

6,250

3,65,000 1,51,250 125 5,000

1,56,375

The cost sheet shows: 1. The cost of materials at `13 per unit. 2. The labor cost at `7.50 per unit. 3. The factory overheads are absorbed at 60% of labor cost. 4. The administration overheads are absorbed at 20% of factory cost. 5. Selling expenses are charged at `3 per unit. 6. The opening stock of finished goods is valued at `22.50 per unit. You are required to prepare: (i) The cost sheet showing the number of units produced and the cost of production, by elements of costs, per unit and in total. (ii) The statement of profit or loss as per cost accounts for the year ended 31st Mar, 2005. (iii) The statement showing the reconciliation of profit or loss as shown by the cost accounts with the profit as shown by the financial accounts. Q 7. During the year ended 31st Mar 1986 the profit of a company as per financial records was `33,248. Profit and Loss A/c for the year ended 31st Mar 1986 Particulars Particulars ` ` To opening stock 4,98,358 By sales 6,93,000 To purchases 1,64,308 By Sundry Income 632 6,58,666 Less Closing Stock 1,50,242 5,08,424 To direct wages 46,266 To factory overhead 41,652 To administration overhead 19,690 To selling expenses 44,352 To net profit 33,248 6,93,632 6,93,632 The costing records show: 1. Closing Stock `1,56,394 2. Direct wages `49,734 3. Factory Overheads `39,428 4. Administration overheads calculated at 3% of sales. 5. Selling expenses absorbed at 5% of sales. Prepare a reconciliation statement and arrive at the profit as per cost accounts using the additional information given. Given below is the Trading and Profit & Loss account of Venal Electronics for the accounting year ended on 31st Mar 1990 Particulars Particulars ` ` To Direct Materials 3,00,000 By Sales, 2,50,000 units 7,50,000 To direct wages 2,00,000

Q 8.

To factory expenses To office expenses To selling and distribution exp. To Net profit

1,20,000 40,000 80,000 10,000 7,50,000

7,50,000

Normal output of the factory is 2,00,000 units. Factory overheads are fixed up to `60,000 and office expenses are fixed for all practical purposes. Selling and distribution expenses are fixed to the extent of `50,000 the rest are variable. Prepare a statement reconciling profit as per Cost Accounts and Financial Accounts. Q 9. The following represents the Trading and Profit & Loss Accounts of a manufacturer of standard fire extinguishers: Particulars Particulars ` ` To materials used 29,150.00 By sales 75,000.00 To productive wages 18,610.00 By stock of finished goods 1,812.50 To factory expenses 14,055.00 By WIP: To gross profit c/d 20,527.50 Materials 2,800 Wages 1,560 Factory Exp. 1,170 5,530.00 82,342.50 82,342.50 To administrative exp. 13,650.00 By gross profit b/d 20,527.50 To Net profit 6,877.50 20,527.50 20,527.50 1,550 extinguishers were manufactured during the year, and 1,500 were sold during the same period. The cost records showed that factory expenses work out at `8.25 and administrative expenses at `9.0625 per article produced. The cost accounts showing an estimated total profit of `7,031.25 for the year. From this information you are required to prepare: 1. Factory Overheads A/c 2. Administrative Overheads A/c, in cost books, and 3. A reconciliation statement of cost and financial accounts

Q 10. ABC Ltd. has furnished the following information from the financial books for the year ended 31st Mar , 2001: Particulars Particulars ` ` To Opening Stock By sales (10,250 units) 28,70,000 70,000 By Closing Stock 50,000 (500 units at `140 each) 10,40,000 (250 units at `200 each) To Material Consumed 6,00,000 To Wages 12,10,000 To Gross Profit c/d 29,20,000 29,20,000 To Factory Overheads 3,79,000 By Gross profit b/d 12,10,000 To Administration By Interest 1,000 Overheads 4,24,000 By rent received 40,000 To selling expenses 2,20,000 To Bad debts 16,000 To Preliminary Exp. 20,000 To Net Profits 1,92,000 12,51,000 12,51,000 The cost sheet shows the cost of material at `104 per unit and the labor cost at `60 per unit. The factory overheads are absorbed at 60% of labor cost and administration overheads at 20% of factory cost. Selling expenses are charged at `24 per unit. The opening stock of finished goods is valued at `180 per unit. Prepare: 1. A statement showing profit as per Cost Accounts for the year ended 31st Mar 2001, 2. A Reconciliation statement.