cost

1. DISCOVER . LEARN . EMPOWER
Chapter-3.1
Topic- Reconciliation of cost
& financial accounts
INSTITUTE-UNIVERSITY SCHOOL OF
BUSINESS
DEPARTMENT OF COMMERCE
Bachelor of Commerce
Managerial Cost Accounting
CMC-211
Lecture no.-1
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2. 2
Reconciliation of Cost &
Financial Accounts
Course Outcome
CO
Number
Title Level
CO1 Students will have knowledge of the concept of cost &
management accounting
Remember
CO2 The objective of the course is to make the students
practically sound maintaining accounting of corporate
world.
Understand
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3. Content
• Introduction
• Reconciliation of Cost & Financial Accounts
• Purpose for Reconciliation Statement.
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4. What is Reconciliation of Cost Accounts
and Financial Accounts?
• Reconciliation of Cost and Financial Accounts is process to find all the
reasons behind disagreement in profit which is calculated as per cost
accounts and as per financial accounts.
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5. Reconciliation of Cost & Financial
Accounts
• The cost and financial accounts are reconciled by preparing a
Reconciliation Statement or a Memorandum Reconciliation Account.
• The following procedure is adopted for preparing a Reconciliation
Statement:
(1) Ascertain the reasons of difference between cost accounts and
financial accounts.
(2) Start with the profit as per Cost Account.
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6. Purpose for Reconciliation Statement.
(a) Items included only in financial accounts.
(b) Items included only in the cost accounts.
(c) Items accounted for differently in cost accounting and financial
accounting.
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7. Items included only in financial accounts.
• There are number of items which appear only in financial accounts,
and not in cost accounts, since they neither do nor relate to the
manufacturing activities, such as,
• Purely financial charges, reducing financial profit
• Losses on capital assets
• Stamp duty and expenses on issue and transfer of stock, shares and
bonds
• Loss on investments.
• Discount on debentures, bonds, etc.
• Fines and penalties,
• Interest on bank loans. 7

8. Conti….
• Purely financial income, increasing financial profit
• Rent received
• Profit on sale of assets
• Share transfer fee
• Share premium
• Interest on investment, bank deposits.
• Dividends received.
• Appropriation of profit – donations and charities.
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9. Items included only in the cost accounts
• There are very few items which appear in cost accounts, but not in
financial accounts. Because, all expenditure incurred, whether for cash
or credit, passes though the financial accounts, and only relevant
expenses are incorporated in cost accounts.
• Hence, only item which can appear in cost accounts but not in
financial accounts is a notional charge, such as,
(i) interest on capital, which is not paid but included in cost accounts to
show the notional cost of employing capital,
or (ii) rent i.e. charging a notional rent of premises owned by the
proprietor.
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10. Items accounted for differently in cost
accounting and financial accounting
• Overhead
• Stock valuation
• Depreciation
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11. Summary
• Introduction
• Reconciliation of Cost & Financial Accounts
• Purpose for Reconciliation Statement.
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12. APPLICATIONS
• Managerial cost accounting is taking place in the total cost of
Management Accountant.
• It is widely used for planning and decision making.
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13. Assessment Pattern
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14. References
• Advanced Cost Accounting- Jain,S/Narang- Kalyani
• Cost Accounting- A managerial emphasis 15th edition
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15. THANK YOU
For queries
Email: poonam.usb@cumail.in
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