Question

From the following information, prepare a Reconciliation Statement:

Hint:

Always add expenses not in cost accounts, deduct incomes not in cost accounts.

Answer 1

Step 1: Commencing with Net Profit from Cost Accounts.
Net Profit as per Cost Accounts = ₹ 35,000

Step 2: Incorporate items that decrease financial profit but not cost profit.
Provision for Doubtful Debts (Financial Accounts Only): ₹ 2,000
Director Remuneration (Financial Accounts Only): ₹ 2,000
Income Tax paid (Financial Accounts Only): ₹ 9,250
Depreciation overcharged in Financial Accounts: ₹ 1,400
Administrative Overheads overcharged in Financial Accounts: ₹ 1,450

Total Additions:
= ₹ 16,100

Step 3: Subtract items that increase financial profit but not cost profit.
Rent received from own building (Cost Accounts Only): ₹ 2,750
Dividend Received (Financial Accounts Only): ₹ 550

Total Deductions:
= ₹ 3,300

Step 4: Generate the Reconciliation Statement.

\[ \begin{array}{|l|r|} \hline \textbf{Particulars} & \textbf{Amount (₹)} \\ \hline \text{Net Profit as per Cost Accounts} & 35,000 \\ \hline \text{Add: Items reducing Financial Profit} & 16,100 \\ \hline \text{Sub-Total} & 51,100 \\ \hline \text{Less: Items increasing Financial Profit} & 3,300 \\ \hline \text{Net Profit as per Financial Accounts} & 47,800 \\ \hline \end{array} \]

Consequently, the Net Profit as per Financial Accounts, following reconciliation, is ₹ 47,800.