Question

State whether the statement is True or False:
‘Transfer to general reserve is an item of cost account.’

Hint:

Reserve transfer = financial account item, not cost account.

Answer 1

Cost accounting focuses on the recording and management of production and operational expenses.
This encompasses both direct and indirect costs associated with manufacturing and service provision.
A transfer to a general reserve is not considered an operating expense; rather, it is an allocation of profit that occurs after profit has been calculated.
In financial accounting, this item is recorded in the profit and loss appropriation account, not in cost accounts.
Consequently, it is excluded when determining the cost of products or services.
Therefore, the statement is False.