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 deals with recording and controlling costs related to production and operations.
It includes expenses that are directly or indirectly connected with manufacturing and services.
Transfer to general reserve is not an operating expense but an appropriation of profit which is made after profits have been determined.
This item belongs to the profit and loss appropriation account in financial accounts, not in cost accounts.
Therefore, it is not included while computing the cost of products or services.
So, the statement is False.