Illustration: Preparation Of A Reconciliation Statement Of Profits As Per Financial Books and As Per Cost Accounting Books
Question: Company XYZ maintains separate cost and financial ledgers. The financial accountant has prepared the following Profit Statement from the financial ledger: Income Statement For 31 st December 2007
The profit reported by the cost accountant was $19,206 The following are discovered:
Absorbed production overheads were $54,310 and the under-absorbed production overheads were carried forward, and not written off to the Income Statement Required: Prepare a reconciliation statement, commencing with the financial profit of $28,310 and showing how this can be reconciled to the cost ledger profit of $19,206
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Suggested Solution: Profit as per financial accounts $29,390
Profit as per Cost accounts $19,206 Workings: (W1):
Increase in stock = $40,600-$38,830 = $1,170 W2:Depreciation in cost ledger = 10% x$468,000/12 = $3,900 W3: Production Overhead:
Actual overhead incurred in cost accounts:
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