RECONCILIATION OF COST &

2 FINANCIAL PROFIT
PROBLEM 1
The net profit of ESSEL PACKAGING CO.LTD. Appeared at `64,377 as per financial records for the year ended 31 st Dec,
2018. The cost books, however, showed a net profit of `86,200 for the same period. A scrutiny of the figures from both
the sets of accounts revealed the following facts:
Particulars `
Works overhead under-recovered in costs 1,560
Administrative overhead over-recovered in costs 850
Depreciation charged in financial accounts 5,600
Depreciation recovered in costs 6,250
Interest on investments not included in cost 4,000
Loss due to obsolescence charged in financial accounts 2,850
Income-tax provided in financial accounts 20,150
Bank interest and transfer fees in financial books (Cr.) 375
Stores adjustments (Credit in financial books) 237
Loss due to depreciation in stock values (charged in financial accounts) 3,375
Prepare a statement showing the reconciliation between the figure of net profit as per cost accounts and the figure of
net profit shown in the financial books.
PROBLEM 2
The profit disclosed by a company’s cost accounts for the year was `30,114, while the net profit shown by the financial
accounts amounted to `19,760. On reconciling the figures the following differences are brought to light.
[a] Overheads in the cost accounts were estimated at `7,500. The actual charge for the year shown by the financial
accounts was `6,932.
[b] Expenses not charged in the cost accounts amounted to `750.
[c] The company has allocated `600 to general reserve.
[d] Work was commenced during the year on a new factory and expenditure of `12,000 was incurred. Depreciation of
5% was provided for in the financial accounts.
[e] Transfer fees received amounted to `28.
[f] The amount charged for income tax `9,000.
Prepare a statement reconciling the figures shown by the cost and financial accounts.
PROBLEM 3
From the following, prepare Reconciliation Statement of M/s. XYZ and Company as on 30-6-2019:
(1) Net Profit as per Financial Accounts `40,340.
(2) Income Tax Provision made `30,000.
(3) Materials Purchases of 5,000 units were recorded in cost at standard cost `24 per
unit whereas in Financial it was recorded at actual cost `22 per unit.
(4) Old Bad debts recovered `20,500.
(5) Loss on sale of furniture was `4,120. Oct, 2006
PROBLEM 4
The net profit of a company amounted to ` 60,412 for the year ending 31st December, 2019, as per its financial records.
The cost records, however, revealed a different figure. A scrutiny of the two sets of accounts disclosed the following
facts:
[a] Works overhead recovered in Cost Accounts during the period amounted to `28,450 while the actual amount of
these expenses was `21,390 only.
[b] Actual office expenses for the period were `19,850, whereas the office overhead recovered in Cost Accounts
amounted to `14,500.
[c] The normal rental value of premises owned by the company, amounting to `10,800 was charged in Cost Accounts
 but not in Financial Accounts.
[d] Selling and distribution expenses for the period amounting to `16,490, were excluding from costing records.
[e] Expenses not included in cost accounts and shown in financial accounts.
Interest on Bank Loan `1,600
Bank charges 160
Directors’ fees 750
Penalty due to late completion on contract 2,500
[f] Gains during the year not included in Cost Accounts
Transfer fees `45
Profit on sale of investment 4,250
Interest on investments 9,450
[g] The following appropriations had been made before arriving at the profit figure `60,412, given below:
Transfer to Dividend Equalisation Fund `10,500
Transfer to Income Tax Reserve 6,400
Transfer to Debenture Redemption Fund 9,000
Prepare Reconciliation Statement and find the amount of net profit/loss as per the costing records.
PROBLEM 5
From the followings, prepare a statement of reconciliation and find-out profit/loss as per financial records.
Particulars `
Net loss as per cost records 1,72,400
Works overhead under-recovered in costing 3,120
Administrative overheads over-recovered in costing 1,700
Depreciation in Financial A/c 11,200
Depreciation in cost A/c 12,500
Interest received 8,750
Obsolescence Loss in Financial A/c 5,700
Provision for Income tax 40,300
Opening Stock:
Financial Records 52,600
Cost Records 54,000
Closing Stock:
Financial Records 52,000
Cost Records 49,600
Interest charges in Cost Accounts only 6,000
Preliminary expenses w/off 950
PROBLEM 6
The profit as per cost accounts is `1,50,000. The following details are ascertained on comparison of Cost and Financial
accounts.
Cost Accounts ` Financial Accounts `
(a) Opening stock:
Finished Goods 18,000 16,000
(b) Closing stock:
Materials 12,000 13,000
Finished goods 20,000 17,000
(c) Interest charged but not paid 10,000
(d) Write off: Preliminary expenses 500
Goodwill 1,500
(e) Dividend on Unit Trust of India received 1,000
(f) Indirect expenses charged in financial
accounts but recovered in cost accounts 75,500 80,000
Find out the profit as per financial accounts by drawing up a Memorandum Reconciliation Account.
PROBLEM 7
The following information is available from Cost and Financial Accounts in respect of Progressive Co. Ltd. for the year
ended 31st December, 2019.
You are required to prepare a statement reconciling the profit or loss from the same. The following items are shown in
financial Accounts but not in Cost Accounts.
Particulars `
Loss due to obsolescence of assets 3,700
Provision for income-tax 38,000
Reduction in value of stock 6,000
Debenture interest 4,000
Loss by fire 1,050
Interest on investments 6,000
Bank interest and transfer fees 1,225
Rent received of staff quarters 2,000
The additional information is as follows:
(a) In Cost Accounts, works overheads are estimated at `26,000, while in Financial Accounts they are charged at
`29,120.
(b) In cost Accounts, administration overheads are estimated at `20,000, while in financial accounts they are debited at
`18,300.
(c) In Cost Accounts, excess charge for depreciation is `1,300 compared to Financial Accounts.
(d) Profit as shown by Financial Accounts does not agree with the profit shown by Cost Accounts is `1,72,400.
PROBLEM 8
From the following information has been extracted from the financial records of ‘X’ Ltd. for the year ended 31st March,
2019:
Particulars `
Opening Stock of Raw material as on 1.4.17 20,000
Raw material Purchased during the year 1,60,000
Stock of Raw material as on 31.3.18 30,000
Wages paid during the year 80,000
Work expenses 55,000
Office and Administration expenses 35,000
Selling and Distribution expenses 45,600
Work in Progress as on 31.3.18
Material 5,000
Wages 3,000
Works over heads 1,900 9,900
Stock of Finished Goods as on 31.3.16 (500 units) 19,000
Sales (8,000 units) 4,00,000
Interest and Dividend Received 1,600
Preliminary Expenses written off 4,500
Ongoing through the costing records you discover that:
[a] The factory expenses have been allocated to the production at 25% on prime cost.
[b] Office and Administrative expenses had been charged at ` 4/- per unit produced.
[c] Selling and Distribution expenses have been charged at ` 5/- per unit sold.
You are required to prepare:
[i] Trading and P/L a/c. as per financial records for the year ended 31st March, 2019.
[ii] A statement showing costing Profit/Loss of the company for the same period.
[iii] Reconcile the profits as shown by the Financial Accounts and as disclosed by Cost Accounts.
PROBLEM 9
ETHUSIASTS LTD. commenced business on 1st April, 2018. Cost and Financial records are maintained for the year
ended31st March, 2019. From the following information’s prepare statements:
[a] Showing the results as per costing records.
[b] Showing result as per financial records and
[c] Reconciling these results.
As per costing As per Financial
Particulars
Records Records
Material consumed (20,000 kgs.) ` 28.50 per kg. ` 26 per kg.
Direct Wages (3000 man days) ` 80 per man day ` 85 per man day
Factory Overheads 20% of the Prime Cost ` 3,60,000
Administrative Overheads ` 30 per kg. Of output produced ` 4,00,000
Sales overheads ` 50 per kg. of output sold ` 9,60,000
Stock (of output produced) At cost of Production ` 1,50,000
As on 31.03.15 (2,000 kgs.)
Work in Process as on31.03.2014 ` 1,62,000 ` 1,62,000
Sales (18,000 kgs.) ` 130 per kg. ` 129.50 per kg.
Rent Income --- ` 1,20,000
Preliminary expenses written off --- ` 30,000
PROBLEM 10
The following is the summary of trading and profit and loss account for the year ended 30 th June, 2019.
` `
Stock (1.7.2017) 7,500 Sales 4,72,500
Purchases 2,05,000 Stock on hand (30.6.18) 12,750
Less: Returns 2,500 2,02,500
Wages 63,750
Factory expenses 15,750
Depreciation on plant 18,300
Gross Profit c/d. 1,77,450
4,85,250 4,85,250
Office expenses 32,685 Gross profit b/d. 1,77,450
Selling & distribution Profit on sale of land 3,750
Expenses 51,330 Interest on investment 1,875
Provision for bad debts 2,000
Interest on Bank
Overdraft 705
Loss on sale of investment 1,500
Goodwill written off 4,000
Net Profit 90,885
1,83,075 1,83,075
Note: Stock Valuation in the financial books is done as under:
Opening Stock ` Closing Stock `
Material 4,050 6,900
Labour 2,250 3,600
Overheads 1,200 2,250
7,500 12,750
In cost accounts:
[a] Recovery rates applied were: Factory on cost @ 5% of sales; Selling and Distribution on cost @ 12% of sales;
Office overheads `28,000.
[b] Stock is valued at Prime cost only.
[c] Non-cost items should be excluded.
Ascertain profit shown by cost accounts either by preparing a memorandum reconciliation account or by drawing a
statement.
PROBLEM 11
From the following particulars prepare:
[a] A statement of Cost of Manufacture for the year ended 2019
[b] A statement of Profit as per Cost Accounts.
[c] Profit and Loss Account in the Financial Books and
[d] Show how you would attribute the difference in the profit as shown by (b) and (c).
`
Opening stock of Raw – Materials 2,88,000
Opening stock of Finished Articles 5,76,000
Purchases of Raw – Materials 17,28,000
Stock of Raw – Materials at the end 4,32,000
Stock of Finished Articles at the end 1,44,000
Wages 7,20,000
Calculate factory on cost at 20% on prime cost, and office on cost at 80% on factory on cost. Actual works expenses
amounted to `4,54,300 and office expenses amounted to `3,71,900. The selling price was fixed at a profit of 20% on cost.
PROBLEM 12
The following figures are available from the financial accounts for the year ended 31 st October, 2019.
Particulars `
Direct material consumption 2,25,000
Direct wages 80,000
Factory overheads 1,65,000
Administrative overheads 2,25,000
Selling and distribution overheads 3,20,000
Bad debts 12,000
Legal Charges 6,000
Preliminary Expenses (written off) 10,000
Dividend received 45,000
Interest on Deposit (received) 10,000
Sales 1,00,000 units 9,00,000
Closing stock of finished goods (25,000 units) 1,25,000
The Cost Accounts reveal:
(1) Direct material consumption `2,25,000 (including `22,500 for partly finished goods). Direct Wages `80,000 (including
`5,000 of partly finished goods)
(2) Factory overheads recovered at 20% on prime cost.
(3) Administrative overheads at `2 per unit of production.
(4) Selling and distribution overhead at `3 per unit sold.
(5) Stock of partly finished goods is valued at factory cost as per Cost Accounts and the same valued is taken into
consideration in Financial Accounts also.
(6) Closing stock of finished goods in Cost Accounts is taken as per the valuation in Financial Accounts.
Prepare:
1) Cost Sheet
2) Financial Profit and Loss Account
3) Statement reconciling the profit disclosed by the cost sheet and Financial Profit and Loss Accounts.
PROBLEM 13
From the accounts of ALLIED CO. LTD., following Manufacturing, Trading and Profit and Loss Account for the year ended
31st December, 2019 was extracted:
Particulars ` Particulars `
To Opening stock of Raw Materials 29,500 By Closing stock of
To Raw Materials Purchased 1,86,500 Raw material 32,000
To Wages paid 2,81,000 By Work-in-progress
To Wages accrued 17,000 Materials 4,000
To Factory Expenses 1,90,750 Wages 5,500
Factory Expenses 3,300 12,800
By Cost of Goods (9000 units) manufactured 6,59,950
7,04,750 7,04,750
 To Cost of goods Manufactured 6,59,950 By Sales (7600 units) 9,12,000
To Administrative Exp. 1,22,500 By Finished Stock (1400 units) 1,17,600
To Preliminary Exp. Written off 10,000 By Interest on Investment 1,300
To Selling & Distribution Exp. 1,64,000 By Dividend Earned 5,500
To Goodwill written off 7,500
To Net Profit tranf. to Appro. A/c 72,450
10,36,400 10,36,400
The following procedure is adopted in costing of the products:
[a] Factory expenses are allocated to production @ 60% of the direct labour cost.
[b] Administrative expenses are applied @ `12 per unit over the units produced.
[c] Selling and distribution expenses are so charged to work out 20% of selling price.
You are required to prepare a Cost Sheet in respect of the above and reconcile the results

PROBLEM 14
SV LTD. has furnished you the following information from the financial books for the year ended 30 th June, 2019.
Particulars ` Particulars `
Opening stock: 500 units at ` 35 each 17,500 Sales: 12,250 units 7,17,500
Materials consumed 2,54,000 Closing stock: 250 units at ` 50 each 12,500
Wages 1,56,000
Gross profit 3,02,500
7,30,000 7,30,000
Factory overheads 94,750 Gross profit 3,02,500
Administration overheads 1,06,000 Interest 250
Selling expenses 55,000 Rent Received 10,000
Bad Debts 4,000
Preliminary expenses 5,000
Net profit 48,000
3,12,750 3,12,750
The cost sheet shows the cost of materials as `26 per unit and the labour costs as `15 per unit. The factory overheads
are absorbed at 60% of labour cost and administration overheads at 20% of factory cost. Selling expenses are charged at
`6 per unit. The opening stock of finished goods is valued at `45 per unit.
You are required to prepare:
[i] A statement showing profits as per cost accounts for the year ended 30th June, 2019.
[ii] Statement showing the reconciliation of profit disclosed in cost account with the profits shown in the
financial accounts.
PROBLEM 15
THE MODERN COMPANY LTD., furnishes, the summary of Trading and P/ L Account for the year ended 31.12.2019.
Particulars ` Particulars `
To Raw Material 1,39,600 By Sales (12,000 Units) 4,80,000
To Direct Wages 76,200 By finished Stock (200) 8,000
To Production Overhead 42,600 By work in Progress:
To Selling and Distribution Overheads 42,700 Materials 28,200
To Administration Overheads 39,100 Wages 11,796
To Preliminary Exp. Written off 2,200 Production Overhead 7,999 47,995
To Goodwill written off 2,501 By Interest on Securities (Gross) 6,000
To Dividend (Net) 3,000
To Income tax 4,100
To Net Profit 1,89,994
5,41,995 5,41,995
The company manufactures a standard unit. Scrutiny of the cost accounts for the same period shows that:
[a] Factory overheads have been allocated to production at 20% on prime cost.
[b] Administration overheads have been charged at `3/- per unit on units produced.
[c] Selling and distribution expenses have been charged at `4/- per units on units sold.
You are required to produce a statement of cost and work out profit as per cost accounts and to reconcile the same
with the profit shown in the financial accounts.
PROBLEM 16
From the following information:
a) Determine the profit as it would be shown by Cost Accounts, and
b) Prepare statement reconciling it with profit shown by Financial Accounts:
Trading and Profit & Loss A/c for the year ended 31st December, 2019
Particulars ` Particulars `
Materials consumed 2,00,000 Sales (1,00,000 units) 4,00,000
Direct Wages 1,00,000
Indirect Expenses (Works) 60,000
Office Expenses 18,000
Selling & Distribution Expense 12,000
Net Profit 10,000
4,00,000 4,00,000
The normal output of the factory is 1,50,000 units. Works expenses of a fixed nature are `36,000. Office expenses are for
all practical purposes constant. Selling and Distribution Expenses are constant to the extent of ` 6,000 and the balance
varies directly with sales.
PROBLEM 17
A company’s profit as per the costing system was `46,126 whereas the audited financial accounts showed a profit of
`33,248.
From the following additional information you are required to prepare a reconciliation statement, showing clearly the
reasons for the difference between the two figures.
Profit and loss account for the year ended 31st March, 2019
Particulars ` Particulars `
Opening Stock 4,94,358 Sales 6,93,000
Purchases 1,64,308
6,58,666
Closing Stock 1,50,242 5,08,424
Direct wages 46,266
Factory overheads 41,652
Gross profit c/d 96,658
6,93,000 6,93,000
Administrative Expenses 19,690 Gross profit 96,658
Selling expenses 44,352 Sundry income 632
Net profit 33,248
97,290 97,290
The cost record shows:
[i] Closing stock balance of `1,56,394.
[ii] Direct wages absorbed during the year `49,734.
[iii] Factory overhead absorbed `39,428.
[iv] Administration expenses charged @ 3% on sales.
[v] Selling expenses charged @ 5% of value of sales.
[vi] No mention of sundry income.
PROBLEM 18
Following is the Profit and Loss Account of M/s. Anubhav Manufacturing Company for the year ended 31st December,
2019.
Particulars ` Particulars `
To Opening stock of By Sales 9,20,000
Raw Materials 60,000 By Closing Stock:
 Work in Process 35,000 Raw Materials 60,000
Finished Goods 80,000 1,75,000 Work in Process 41,000
To Purchases 2,40,000 Finished goods 30,000 1,31,000
To Factory Wages 60,000
To Electricity Charges 66,000
To Factory Overheads 90,000
To Gross Profit c/d 4,20,000
10,51,000 10,51,000
To Administrative Expenses 25,000 By Gross Profit b/d 4,20,000
To Selling and Distr. Expenses 1,15,000 By Miscellaneous Income 20,000
To Bad debts 30,000
To Net Profit 2,70,000
Total 4,40,000 4,40,000
Their Cost Account showed a profit of `2,81,750. On scrutiny of their Costing Profit and Loss Account it was found that –
(1) Their Opening Stocks and Closing stocks were valued as under:
Opening Stock of Closing Stock of
Raw Materials ` 80,000 Raw Materials ` 70,000
Work in Process ` 40,000 Work in Process ` 44,000
Finished Goods ` 60,000 Finished Goods ` 20,000
(2) They charged administrative expenses at `18,000 and Selling and distribution expenses at `1,27,000.
(3) They had charged depreciation @ 25% on Written Down Value Method on its plant which was purchased on 1 st July
2019 for `80,000. In Financial accounts, however, the depreciation was provided on Straight Line Method and the
same was included in the Factory overheads of `90,000.
Prepare a statement reconciling the difference in the profits as disclosed by the two records. Apr, 1995
PROBLEM 19
The Profit and Loss Account as shown in the financial books of a company for the year ended 30-9-2019 together with a
statement of reconciliation between the profit as per financial and cost accounts is given below:
Profit and Loss Account for the year ended 30-9-2019
Particulars ` Particulars `
Opening stock: Sales 15,00,000
- Raw Materials 90,000 Closing Stock:
- Work in Progress 50,000 - Raw Materials 98,000
- Finished goods 70,000 - Work in progress 53,000
Raw materials purchase 5,00,000 - Finished goods 72,000
Direct Wages 2,00,000 Misc. receipts 45,000
Factory overheads 2,00,000
Administration expenses 1,70,000
Selling and distribution expenses 2,20,000
Preliminary expenses w/off 75,000
Debenture interest 30,000
Net Profit 1,63,000
17,68,000 17,68,000
Statement of Reconciliation of Profit as per Financial and Cost Accounts
Particulars ` `
Profit as per Financial Accounts 1,63,000
(a) Difference in valuation of stock:
Add: Raw Materials – closing stock 1,200
Work in progress – opening stock 1,300
Finished goods – opening stock 2,000
Finished goods – closing stock 1,000
Total (A) 5,500
Less : Raw Materials – opening stock 1,650
 Work in progress – closing stock 750
Total (B) 2,400
(b) Other items 3,100
Add: Preliminary expenses written off 75,000
Debenture interest 30,000
1,05,000
Less: Miscellaneous receipts 45,000 60,000
Profit as per Cost Accounts 2,26,100
You are required to prepare the statement of Cost and Profits.
PROBLEM 20
From the following details prepare a Profit & Loss Account.
STATEMENT OF COST AND PROFIT
`
Material consumed 1,37,600
Direct wages 76,200
Direct Expenses 2,000
Prime Cost 2,15,800
Factory overheads (20% on P.C.) 43,160
2,58,960
Less: Closing work-in-progress 47,995
Works cost 2,10,965
Add: Administration overheads (12,200 x 3) 36,600
Cost of Production 2,47,565
Less: cost of finished goods Stock (200/12,200 x 2,47,565) 4,058
Cost of goods sold 2,43,507
Add: Selling and distribution expenses (4 x 12,000) 48,000
Cost of sales 2,91,507
Profit 1,88,493
Sales 4,80,000
RECONCILIATION STATEMENT
` `
Profit as per cost accounts 1,88,493
Add: Over absorption of factory overhead 560
Over absorption of selling and distribution overheads 5,300
Over Valuation of closing Stock in financial Accounts (8,000 – 4,058) 3,342
Interest on security credited in financial account 6,000 (+) 15,802
2,04,295
Less: under absorption Administration overheads 2,500
Preliminary Expenses 2,200
Goodwill 2,501
Dividend 3,000
Income Tax 4,160 (-) 14,361
As per financial account 1,89,964
Profit disclosed by a company’s Cost Accounts for the year ended 31 st March, 2019 was `1,00,000 whereas the net profit
as disclosed by the financial accounts was `59,500.
Following information is available:
(1) Work has commenced during the year on a new factory and expenditure of `60,000 was incurred. Depreciation was
provided at 5% for six months in the financial accounts.
Director’s fees shown in financial accounts were `4,000.
(2) Share transfer fees received during the year were `2,000.
(3) Provision for Income-tax was `30,000.
(4) The company allocated `10,000 as provision for doubtful debts.
(5) Overheads as per Cost Accounts were estimated at `17,000. The change for the year shown by the financial accounts
was `14,000.
From the above information, prepare a statement reconciling figures shown by Cost and Financial Accounts.

PRACTICE PROBLEMS
PROBLEM 21
The Net Profit of a company for the ended on 31 st March, 2018 was `56,600 as shown by the Financial Books. The Cost
Account disclosed a profit of `59,650 for the same period. On an examination of both the sets of accounts, the following
facts were discovered:
(a) Goodwill written off in financial accounts `1,500.
(b) Transfer fees received during the year `200.
(c) Depreciation charged in Financial Accounts `750.
(d) Depreciation recovered in cost statements `1,000.
(e) Opening Stock as on 1st April 2018 as per financial records `13,000.
(f) Opening Stock as on 1st April 2018 as per cost statements `12,000.
(g) Closing stock as on 31st March 2019 as per financial records `14,000.
(h) Closing Stock as on 31st March 2019 as per cost statement `15,000.
Prepare reconciliation statement reconciling the profit as shown by financial and cost books.
PROBLEM 22
From the following information you are required to prepare a statement reconciling the results of Cost Books:
Particulars `
Net profit as per Financial Books 51,052
Works overheads under recovery in cost book 1,001
Depreciation charged in Financial Books 13,000
Depreciation charged in Cost Book 14,326
Obsolescence loss charged in Financial Books Only 2,021
Income-tax provided in Financial Books only 2,626
Interest received but not recorded in Cost Book 3,031
Bank interest debited in Financial Books only 292
PROBLEM 23
ABC Ltd. is maintaining separate books for cost and financial accounts. The net profit for the Year ended 31 st March,
2019 as per financial accounts amounting to `12,08,240. On verification of both the accounts the following discrepancies
are disclosed.
[1] The cost accounts have taken into account an amount of `2,16,000 as notional rent of company’s own building and
premises.
[2] Factory overhead recovered in cost accounts during the period amounted to `5,69,000. But the actual expenses
incurred during the period was `4,27,800.
[3] The actual administrative overhead for the period was `3,97,000 and the recovered account in cost accounts was
`2,90,000.
[4] Selling expenses of `3,29,800 was only charged in financial accounts.
[5] Depreciation provided in (`)
Financial accounts 8,00,000
Cost accounts 8,48,000
[6] The following receipts are not included in cost accounts:
(`)
Interest on Investments 1,89,000
Profit on sale of machinery 85,000
Transfer fees 900
[7] The expenses that are charged in financial accounts but were not included in cost accounts.
Interest on Bank Loan ` 35,200
Fines and Penalties ` 65,000
Donations ` 50,000
 Goodwill written off ` 1,50,000
[8] The following appropriation had been made before arriving at a profit figure of `12,08,240 shown above:
Transfer to Income-tax reserve ` 1,28,000
Transfer to Debenture Redemption Reserve ` 1,80,000
Transfer to Dividend Equalisation Reserve ` 2,10,000
From the information given above, prepare a reconciliation statement and ascertain the Profit as per cost
accounts for the Period.
PROBLEM 24
Prepare a Reconciliation statement from the following data:
Particulars `
Net loss as per Cost Accounts 3,44,800
Net Loss as per Financial Accounts 4,32,090
Works overheads under recovered cost accounts 6,240
Depreciation overcharged (in cost A/cs) 2,600
Admn. Overheads recovered in excess 3,400
Interest on investments 17,500
Goodwill written off in Financial books 11,400
Income tax paid 80,600
Stores adjustment (Credit in financial books) 950
Depreciation of stock charged in financial books 13,500
PROBLEM 25
A firm of sports Equipment from LUDHIANA MANUFACTURERS two varieties of cricket bats namely “Champion” and
“Classic”. The following information has been made available from their accounts for the half year ended 31.12.2019.
Particulars Champion Classic
(I) (a) Average Material cost per piece 80/- 60/-
(b) Average Labour cost per piece 140/- 110/-
(c) Selling price per piece 550/- 450/-
(d) Finished Goods
(i) Opening stock 70 pieces 60 pieces
(ii) Closing stock 40 pieces 50 pieces
(iii) Sales 530 pieces 710 pieces
(II) Valuation of stocks (per unit)
(a) Opening Stock:
(i) Financial Books 350/- 275/-
(ii) Cost Books 420/- 325/-
(b) Closing Stock:
(i) Financial Books 380 300
(ii) Cost Books At cost of production
(III) Actual indirect expenses incurred on manufacturing, selling and distribution were `1,20,000/- , `68,000/ and
`50,000/- respectively.
You are required to prepare:
[a] A Financial Profit and Loss A/c and find out financial net profit.
[b] A cost sheet and find out total cost and per unit cost of both the types of bats, manufactures and also the
costing Net profit taking material and wages at actual cost, whereas works overheads @ 100% of wages,
administrative overheads @ 25% of works cost and selling overheads @ 45/- per unit sold.
[c] A statement of reconciliation of net profit shown by financial Book and costing books.

PROBLEM 26
The following information is available from the financial accounts of company for the year ending 31 st December 2019:
Particulars `
Materials Consumed 5,20,000
Direct wages 2,40,000
 Factory Expenses 3,60,000
Administration Expenses 5,00,000
Selling and Distribution Expenses 9,60,000
Bad Debts written off 40,000
Preliminary Expenses written off 30,000
Interest and Dividend received 1,20,000
Sales (1,20,000 Units) 19,20,000
Closing Stock (40,000 Units) 4,00,000
Work in Progress 31-12-2015 1,60,000
The following information was revealed by the cost accounts:
(i) Direct Materials consumption was `5,70,000
(ii) Factory Overheads were taken at 20% on Prime Cost.
(iii) Administration Expenses have been taken at `4 per unit of production.
(iv) Selling and Distribution expenses were taken at `6,50 per unit sold.
Prepare (a) Costing Profit and Loss Account. (b) Financial Profit and Loss Account. (c) statement reconciling the
difference in profit / Loss as per cost records and as per financial accounts.
PROBLEM 27
The following figures are extracted from the financial accounts of a Company for the year ending 31 st March, 2019:
Particulars `
Sales (2,000 Units) 5,00,000
Materials 2,00,000
Wages 1,20,000
Factory overhead 90,000
Administrate Overhead 52,000
Selling and Distribution overhead 36,000
Finished Goods as on 31-3-2018 (123 Units) 30,000
Work-in-Process as on 31-3-2018 36,630
Goodwill Written off 40,000
Interest paid 4,000
Profit on Sales Asset 15,000
In the Costing records, Factory overhead is charged at 100% of Wages and administration overhead is charged at 10% of
Factory Cost and Selling and Distribution at the rate of `2/- per unit sold.
Prepare:
(a) Financial Profit and Loss Account
(b) Costing Profit and Loss Account and
(c) Statement reconciling the profit as per Cost records with the Profits as per financial records.
PROBLEM 28
The following figures are extracted from the financial accounts of a company for the year ending 31 st March, 2019:
Particulars `
Sales 6,50,000
Stock of Raw Materials as on 1.4.17 40,000
Stock of Finished goods as 1.4.16 80,000
Stock of Finished goods as on 31.3.18 20,000
Stock of Raw Materials as on 31.3.18 60,000
Purchase of Raw Materials 2,40,000
Wages 1,00,000
Factory on Cost 77,500
Office on Cost 61,000
In the costing records factory on cost is charged at 25% of Prime Cost and office on cost at 75% of Factory on cost.
You are required to prepare:
(i) Financial Profit and Loss Account.
(ii) Costing profit and Loss Account; and
(iii) Statement reconciling the profit as per cost records with the profit as per financial records.
PROBLEM 29
The following is the profit and Loss Account of a company as per its financial records. Profit and Loss Account for the
year ending 31st December, 2018:
Particulars ` Particulars `
To Materials consumed 3,68,000 By Sales (15,200 units) 18,24,000
To Direct Wages 5,96,000 By Work in Progress 25,600
To Factory Expenses 3,81,500 By finished Goods 2,35,200
To Administration Expenses 2,45,000 (2,800 units)
To Selling Expenses 3,28,000 By Interest on Bonds 2,700
To Preliminary Expenses w/o 35,000 By Dividend on Units 16,000
To Net Profit 1,50,000
21,03,500 21,03,500
In the cost accounts the following procedure has been adopted :
(i) Factory Expenses have been taken at 60% of Direct Wages:
(ii) Administration Expenses have been taken at `12 per unit produced
(iii) Selling Expenses have been taken at 20% of sales.
Prepare a statement showing profit as per-cost accounts and reconcile the same with the profit shown as per financial
accounts.
PROBLEM 30
A company’s Trading and Profit and Loss Account was as follows:
Particulars ` Particulars `
To Opening Stock 1,00,000 By Sales 1,75,000
To Purchase 80,000
1,80,000
Less: Closing Stock 80,000
1,00,000
To Direct Wages 20,000
To Factory Expenses 15,000
To Gross Profit c/f. 40,000
1,75,000 1,75,000
To Administrative Expenses 10,000 By Gross Profit 40,000
To Selling Expenses 15,000
To Net Profit 15,000
40,000 40,000
Closing records show the following:
(a) Stock Ledger closing balance ` 89,000
(b) Direct Labour `23,000
(c) Factory Overheads `13,000
(d) Administrative overheads and selling expenses each are calculated at 8% of the selling price.
Prepare Cost and Profit and Loss Account and the statement of reconciliation between the profit or loss as per the two
accounts.
PROBLEM 31
A company’s Trading and Profit and Loss Account is as follows:
Particulars ` Particulars `
Purchase 37,815 Sales:
Less: Closing Stock 6,120 31,695 75,000 units @ ` 1.50 each 1,12,500
Wages (Direct) 15,750 Profit on Sale of Machinery 3,900
Works Expenses 18,195
Selling Expenses 10,650
Administration Expenses 8,010
Depreciation 1,650
 Net Profit 30,450
1,16,400 1,16,400
The profit as per Cost Accounts was `29,655.
Prepare reconciliation statement to reconcile Cost Profit with Financial profit.
Further information as per Cost Accounts:
(a) Closing Stock was taken as ` 6,420.
(b) The works expenses were taken at 100% of Direct Wages.
(c) Selling and administration expenses were charged at 10% of Sales and at ` 0.10 per unit respectively.
(d) Depreciation was taken at `1,200.
PROBLEM 32
Given below is the Trading and Profit and Loss Account of Vikas Electronics for the accounting year 31-3-2019.
Particulars ` Particulars `
To Materials consumed 3,00,000 By Sales (2,50,000 units) 7,50,000
To Direct Wages 2,00,000
To Factory Expenses 1,20,000
To Office Expenses 40,000
To Selling and distribution Expenses 80,000
To Net Profit 10,000
7,50,000 7,50,000
Normal output of the factory is 2,00,000 units. Factory overheads are fixed upto `60,000 and office expenses are fixed.
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.
PROBLEM 33
Profit and Loss account of Chetan Ltd. for the year ended 31-12-2018 was as under:
Particulars ` Particulars `
To Office Expenses 39,200 By Gross Profit 60,900
To Selling Expenses 23,000 By Interest on Deposit 2,500
To Loss on Sale of Machinery 1,250 By Dividend 3,450
To Depreciation on Machinery 1,800 By Net Loss 1,850
To Depreciation on Building 2,300
To Debenture Discount 400
To Preliminary Expenses 800
68,750 68,750
As compared to Cost Accounts, Office indirect expenses are 12% more in financial accounts while Selling indirect
expenses are 8% less.
Depreciation on machinery was-estimated by ` 350, while depreciation on building was under estimated by ` 150.
Prepare
(1) Statement of Cost and Profit/Loss and
(2) Statement showing reconciliation of profit or loss of Cost Accounts with that of Financial Accounts
ROBLEM 34
The following figures have been extracted from the Financial Accounts of Bawa Manufacturing Company for the first
year of its operations:
Particulars `
Direct Material Consumption 50,00,000
Direct Wages 30,00,000
Factory Overheads 16,00,000
Administrative Overheads 7,00,000
Selling & Distribution Overheads 9,60,000
Provision for Bad Debts 80,000
Preliminary Expenses Written off 40,000
Dividend Received 1,00,000
 Interest received on Deposits 20,000
Sales (1,20,000 units) 1,20,00,000
Closing Stock:
Finished Goods (4000 units) 3,20,000
Work in Progress 2,40,000
The Cost Accounts for the same period reveal that the Direct Material consumption was `56,00,000. Factory overheads
are recovered at 20% on Prime Cost. Administrative overheads are recovered at `6 per unit of production. Selling &
Distribution overheads are recovered at `8 per unit sold.
Prepare the Profit & Loss Accounts as per Financial Records and cost sheet as per cost records. Reconcile the profit as
per the two records. The cost accounts value closing stock of finished goods at cost of production.
PROBLEM 35
From the following particulars, prepare Reconciliation Statement and Ascertain Costing Profit/Loss.
Net Profit as per financial P & L A/c. `50,000, Opening Stock was overvalued by `2,000 in Cost Accounts as compared to
financial accounts. Administrative overheads charged in Financial Books `20,000 but recovered in Cost `40,000.
Income Tax Provision `1,200.
Notional Salary of Proprietor in Cost `20,000
Interest Received `12,000.
Closing Stock as per financial books `16,200.
Whereas in Cost books it was `19,000
PROBLEM 36
Following is the Trading and profit and Loss Account of M/s Vishal Enterprises for the year ended 31-3-2019.
Particulars ` Particulars `
To Opening Stock (500 units) 17,500 By Sales (10250 units) 7,17,500
To Materials 2,60,000 By Closing Stock (250 units) 12,500
To Wages 1,50,000
To Factory Overheads 94,750
To Gross Profit c/d 2,07,750
7,30,000 7,30,000
To Administrative Overheads 1,06,000 By Gross Profit c/d 2,07,750
To Selling Overheads 55,000 By Dividend Received on
To Loss on Revaluation of Investments 10,250
Assets 9,000
To Net Profit 48,000
2,18,000 2,18,000
In Cost Accounts, materials charged @ `25/- per unit and wages @ `15/- per unit. Factory overheads taken @ 60% of
wages. Administrative overheads applied @ 20% of works cost. Selling overheads taken @ ` 6/- per unit sold.
You are required to prepare:
(a) Statement of cost showing total cost and cost per unit.
(b) Statement of Reconciliation of Profit / Loss.
PROBLEM 37
Following is the Summarised Trading and Profit and Loss Account of Sheetal Industries for the year ended 31.03.2019.
Trading and Profit and Loss Account for the year ended 31-03-2019
Particulars ` Particulars `
To Opening Stock of Raw Materials 9,000 By Sales (12,000 Units) 4,80,000
To Purchases of Raw Materials 2,10,000 By Closing Stock
To Carriage Inwards 5,000 Finished Goods (3,000 Units) 66,000
To Wages 75,400 Raw Materials 24,000
To Factory Expenses By Interest on Securities 17,000
Paid 52,000 By Profit on Sale of Assets 1,20,000
Add: Outstanding 2,200 54,600
To Administrative Overheads 52,500
To Selling and Distribution Overheads 96,000
 To Goodwill written off 12,500
To Interest on Loans 1,500
To Dividend 2,500
To Income Tax 5,000
To Net Profit 1,83,000
7,07,000 7,07,000
A standard unit was manufactured during the year. The cost accounting records showed the followings:
(a) Materials consumed @ `10 per unit produced.
(b) Direct Wages @ `6 per unit produced.
(c) Factory Overheads were observed @ 25% of Prime Cost.
(d) Administrative Overheads were absorbed @ `5 per unit produced.
(e) Selling and Distribution Overheads were absorbed @ `7 per unit sold.
You are required to prepare the detailed cost statement for the year ended 31-03-2019 and a statement of
reconciliation.
PROBLEM 38
Following is the Profit and Loss Account, as per financial records, of M/s Tirupati Traders for the year ended 31st March,
2019.
Particulars ` Particulars `
To Opening Stock (Finished – 6,000 units) 59,760 By Sales (90,000 units) 11,70,000
To Raw Materials Consumed 5,19,400 By Closing Stock 52,776
To Carriage Inwards 5,100 (Finished – 4,500 units)
To Direct Wages 72,872 By Bank Interest 410
To Salesman Commission 38,520 By Dividend 6,900
To Office Salaries 25,368
To Motor Car Expenses 18,384
To Advertisement 61,920
To Directors Remuneration:
Office 12,000
Works 12,000
Sales 14,400 38,400
To Indirect Wages 20,268
To Plant depreciation 11,472
To Workmen Compensation Reserve 13,375
To Office Rent 6,900
To After sales service expenses 4,476
To Interest 6,000
To Showroom Rent 9,000
To Carriage Outward 6,240
To Depreciation on Delivery Van 5,040
To Factory Fuel 4,248
To Packing and Forwarding 3,270
To Miscellaneous Factory Expenses 3,270
To Preliminary Expenses w/off 4,200
To Audit Fees 2,520
To General Office Expenses 1,500
To Factory Rent 18,720
To Loss on Sales of Investment 4,017
To Insurance:
Office 300
Sales 720
Factory 1,800 2,820
To Printing and Stationery 720
To Depreciation:
 Factory Furniture 600
Office Furniture 900
Showroom Furniture 420 1,920
To Telephone Charges:
Office 129
Sales 627 756
To Legal Fees 504
To Net Profit c/d to B/S 2,59,226
12,30,086 12,30,086
Closing Stock in cost accounts is values at cost of production. However opening stock in cost records is same as per
financial records.
Prepare:
(a) Detailed cost statement showing total cost (excluding per unit) and profit.
(b) Reconciliation statement showing reconciliation of Profits.
PROBLEM 39
From the following details find out Profit and Loss as per Financial Accounts.
Particulars `
Under absorption of factory overheads 12,500
Overvaluation of closing stock of Raw Materials in Cost Accounts 8,600
Profit as per Cost Accounts 2,70,000
Depreciation Under Recovered in Cost Account 3,700
Over absorption of Administrative Overheads 9,800
PROBLEM 40
From the following information, find out Profit and Loss as per Financial Records:
Particulars `
Over absorption of Selling and Distribution Overheads 3,000
Overvaluation of Closing Stock in Cost Accounts 13,800
Under absorption of Office and Administrative Overheads 24,700
Loss as per Cost Accounts 85,000
Excess Depreciation charged in Financial Accounts 4,500
PROBLEM 41
RST Ltd. has furnished the following information from the financial books for the year ended 31 st March, 2019:
Particulars ` Particulars `
To Opening Stock (Finished goods 2,500 units) 2,50,000 By Sales (47,500 units) 59,85,000
To Raw Materials 20,80,000 By Closing Stock 5,00,000
To Direct Wages 15,15,000 (Finished Goods 5,000 units)
To Factory Expenses 10,18,000 By Commission Received 35,000
To Office and Administrative By Bad Debts Recovered 12,000
Expenses 8,45,000 By Net Loss 36,000
To Selling and Distribution Expenses 7,00,000
To Goodwill w/off 60,000
To Loss on Sale of Investments 1,00,000
65,68,000 65,68,000
st
The following information is revealed from the cost records for year ended 31 March 2019
(a) Raw material consumption is `40 per unit of Production.
(b) Direct wages are 70% of Direct Materials.
(c) Factory overheads are recovered @ 50% of Direct Materials.
(d) Administrative overheads are taken @ 20% of Works Cost.
(e) Selling and Distribution overheads are recovered `15 per unit.
(f) Opening Stock of Finished goods is valued at `101.80 per unit.
(g) Closing Stock of Finished goods is to be valued at cost of Production.
(h) Selling price is recorded at `125 per unit.
Prepare:
(i) Detailed Cost Statement showing total cost, per unit cost and profit.
(ii) Statement of Reconciliation

PROBLEM 42
Following is the Profit and Loss Account as per financial records of M/s Niyati Enterprises for the year ended 31st March
2019:
Dr. Cr.
Particulars ` Particulars `
To Opening Stock (Finished Goods 2,000 Units) 2,50,000 By Sales 30,00,000
To Direct Material Consumed 12,00,000 (Selling Price @ `125 p.u.)
To Carriage Outward 30,000 By Closing Stock 2,20,000
To Direct Wages 8,00,000 (Finished Goods 2,000 units)
To Demonstration Expenses 30,000 By Dividend received 10,000
To Legal Charges 40,000
To Haulage of Machinery 20,000
To Depreciation (Plant & Machinery) 1,50,000
To Printing & Stationery 40,000
To Advertisement Expenses 60,000
To Other Indirect Expenses
Works 80,000
Office 80,000
Sales 80,000 2,40,000
To Drawing Office Expenses 60,000
To Audit Fees 40,000
To Preliminary Expenses Written off 1,00,000
To Net Profit 1,70,000
32,30,000 32,30,000
For the same period, Cost Accounting records showed the following:
(1) Depreciation on Plant and Machinery was recorded at `40,000.
(2) Opening Stock of finished goods has been valued at `2,00,000.
(3) Closing Stock of finished goods has been valued at cost of Production.
Prepare:
(a) Detailed cost statement for the year ended 31 st March, 2017 showing total cost (excluding per unit) and
profit.
(b) Statement of Reconciliation of Profits (Starting with Profit as per Cost Sheet).
PROBLEM 43
Following is the summarized Profit and Loss Account of XYZ Industries for the year ended 31-03-2019.
Profit and Loss Account for the year ended 31st March, 2019
Particulars ` Particulars `
To Materials Consumed 2,00,000 By Sales (12,000 units) 4,80,000
To Wages 75,400 By Closing Stock
To Factory Exps. Paid 52,400 (Finished Goods 3000 Units) 66,000
Add: Outstanding 2,200 54,600 By Interest on Securities 17,000
To Administrative Overheads 52,500 By Profit on sale of Assets 1,20,000
To Selling & Distribution Overheads 96,000
To Interest on Loans 14,000
To Income Tax 7,500
To Net Profit 1,83,000
6,83,000 6,83,000
The cost accounting record for the above period showed the following:
a. Material consumed @ `10 per unit produced.
b. Direct wages @ `6 per unit produced.
c. Factory overheads were absorbed @ 25% of Prime Cost.
d. Administrative Overheads were absorbed @ `5 per unit produced.
e. Selling and Distribution overheads were absorbed @ `7 per unit sold.
You are required to prepare the detailed Cost Sheet for the year ended 31-03-2019 and a statement of Reconciliation.
PROBLEM 44
Following is the summarized Profit and Loss Account of M/s Star Manufacturing Co. Ltd. for the year ended 31 st
December, 2018:
Profit and Loss Account for the year ended 31st December, 2018
Particulars ` Particulars `
To Wages 1,51,000 By Sales (12,000 units) 6,00,000
To Materials used 2,74,000 By Closing Stock of Finished Goods 16,000
To Factory expenses 83,000 (400 units)
To Expenses on Administration 38,240 By Closing Stock of Work-in-progress 12,000
To Selling Expenses 45,000 By Dividend Received 1,800
To Goodwill written off 2,000
To Preliminary Expenses written off 4,000
To Net Profit 32,560
6,29,800 6,29,800
In the cost accounts:
1. Factory expenses have been allocated to the production at 20% on prime cost.
2. Expenses of administration at `3 per unit produced.
3. Selling Expenses at `4 per unit sold.
You are required to prepare cost sheet of the company and reconcile the profits disclosed by cost accounts and those
shown by Financial Accounts. Oct, 2015
PROBLEM 45
Following is the summerised Profit & Loss Account of Govind Industries Ltd. for the year ended 31 st March, 2019:
Particulars ` Particulars `
To Direct Material 20,000 By Sales (6,000 units) 48,000
To Wages 7,540 By Closing Stock
To Factory Overheads 5,460 (Finished goods 1,500 units) 6,600
To Office Overheads 5,250 By Interest on Investments 17,700
To Selling & Distribution Overheads 9,600 By Profit on sale of furniture 12,000
To Interest on Loan 1,400
To Income tax 750
To Net Profit 34,300
84,300 84,300
The cost accounting records for the above period showed the following.
(a) Direct Material @`5 per unit produced.
(b) Direct wages @ `6 per unit produced.
(c) Factory overheads were absorbed @ 25% of combined cost of direct material & direct wages.
(d) Administrative overheads were absorbed @ `2.5 per unit produced.
(e) Selling & Distribution overheads were absorbed @ `3.5 per unit sold.
You are required to prepare the detailed cost sheet for the year ended 31 st March, 2019 and statement of
reconciliation.

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