Question

What is Memorandum Reconciliation Account?

Hint:

Reconciliation = matching cost profit with financial profit.

Answer 1

A Memorandum Reconciliation Account is a statement or account prepared when a business keeps separate cost and financial accounts.
Due to differences in the treatment of certain items like overhead absorption, stock valuation, or non-cost items, profit as per cost accounts often differs from profit as per financial accounts.
The purpose of preparing this reconciliation is to explain the reasons for these differences and ensure both sets of accounts match in the end.
It is called a memorandum because it is often prepared as an internal statement, not as part of formal accounts.
This helps management check the accuracy of costing records and maintain consistency with financial books.