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: Start with Net Profit as per Cost Accounts.
Net Profit as per Cost Accounts = ₹ 35,000

Step 2: Add items which reduce financial profit but not cost profit.
Provision for Doubtful Debts (Financial Only): ₹ 2,000
Director Remuneration (Financial Only): ₹ 2,000
Income Tax paid (Financial Only): ₹ 9,250
Depreciation overcharged in Financial Accounts: 5,950 – 4,550 = ₹ 1,400
Administrative Overheads overcharged in Financial Accounts: 3,900 – 2,450 = ₹ 1,450

Total Additions:
= 2,000 + 2,000 + 9,250 + 1,400 + 1,450 = ₹ 16,100

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

Total Deductions:
= 2,750 + 550 = ₹ 3,300

Step 4: Prepare the Reconciliation Statement.

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

Therefore, the Net Profit as per Financial Accounts is ₹ 47,800 after reconciliation.