Reconciliation of cost and finance accounts
Meaning and definition of cost solution description
Under this method there is no need to reconcile the financial accounts of the cost accounts. But in the institutions where separate books are kept for accounting of cost and financial items, it is only natural to feel the need to match them. bcom 2nd year reconciliation of cost and finance account
Both cost accounts and financial accounts are prepared on the basis of the same original papers. Cost accounts are estimates if trading accounts are realities. A successful trader is one whose estimates are closest to the realities. By examining the hypotheses and realities, it becomes known that what was the main difference in the estimates? By examining these estimates and looking at these shortcomings and limitations, it can be found where exactly the error was in the estimates and in the future an attempt is made to bring these estimates closer to the reality? .
Following are some of the key definitions in relation to the cost resolution statement –
In the words of HJ Wheldon, cost accounting remains an incomplete system until it is structured with financial accounts in such a way that the results represented by cost accounts and financial accounts can be matched. “
According to Walter W. Bigg, “Although cost accounts and financial accounts are kept completely separate in many cases, they are not necessarily able to match each other. If it is not possible to do so, there will be little confidence in the calculation of cost accounts. “
On the basis of the analytical interpretation of the above mentioned definitions of the cost resolution statement, it can be concluded that the cost reconciliation statement provides detailed information about the reasons for the difference in net profit or net loss of cost accounts and financial accounts.
In words – “As long as there is la.” If financial accounting can be done.
Objectives for preparation of assembly statement
- The following objectives are mainly to prepare financial accounts and cost accounts.
2. To get the knowledge of the reasons for the difference – By preparing the solution statement, the reasons for the difference in the result of both the accounts are revealed. Costing articles can be made more accurate in the long run by finding out the reasons.
Reasons of Difference Between the Results of Cost Accounts – Due to difference in results displayed by cost accounts and financial accounts
(1) Difference in direct expenses –
The overheads in cost accounts are absorbed at approximate values based on past experience while in financial accounts the actual amounts of overheads are written.
(2) Difference in direct expenses –
Due to direct expenses, there is no difference in the results displayed by both books because direct expenses are accounted for only on the actual amount in both books.
(3) Some items not to be included in financial accounts (Items excluded from financial accounts) –
There are some expenses which are accounted for in the cost accounts but they are not written in the financial accounts, due to which the results of both will be different.
(4) Some items not included in cost accounts (Items excluded from cost account) –
There are some incomes which are included in the business accounts but are not shown in the cost accounts such as commission received, capital gains, contingent benefits, interest received from the bank, etc. The omission of these incomes in the cost accounts makes a difference in the results of both accounts.
(5) Difference in methods of charging depreciations
There are different methods of writing down and generally the amount of depreciation charged by each method also varies.
(6) Difference in stock valuation.
In financial accounts, the stock is evaluated at both the cost price and market value whichever is lower, while in the cost accounts, the final stock is always evaluated at a cost. ) The cost accounts should be taken as the basis for preparing the cost resolution statement. After this, the following tasks should be done
(11) If any expenditure in cost accounts is written more than the financial accounts, then the excess should be added to the benefit of cost accounts. On the contrary, the difference in the position should be reduced from the profit of collagated articles.
(12) If the cost accounts are written more than the item of sale than the financial accounts, then the excess should be reduced from the profit of the cost accounts. In contrast, the amount of difference should be added to the profit of cost accounts.
(13) If the value of initial stock in cost accounts is more than that of financial accounts, then the difference amount should be added to the benefit of cost accounts. In contrast, the difference amount should be reduced from the profit of cost accounts.
(14) If the value of the last wing in cost accounts is more than that of financial accounts, then the difference amount should be reduced from the profit of cost accounts. In contrast, the amount of difference should be added to the profit of cost accounts.
(15) If the item of expenditure is not shown in the cost accounts but has been included in the financial accounts, it should be deducted from the cost accounts. On the contrary, it should add to the benefit of cost accounts.
(16) If an item of income is not shown in cost accounts but has been included in financial accounts, it should be added to the benefit of cost accounts. Conversely, the position C should be subtracted from the profit of the accounts.
bcom 2nd year reconciliation of cost and finance account notes in enlish
- Importance and Elements of Cost
- Contract and Job Costing
- Process Costing
- Operating Cost
- Reconciliation of Cost and Financial Accounts
- Unit of Output costing
- Tender price
- Machine Hour Rate
- Cost Contral Account and Integrate Accounts
reconciliation of cost and financial accounts