CAUSES OF DIFFERENCE IN RECONCILIATION OF COST AND FINANCIAL ACCOUNTING

CAUSES OF DIFFERENCE IN RECONCILIATION OF
 COST AND FINANCIAL ACCOUNTING.


Causes of differences:- 
      1)Purely financial items:
              i)Appropriation of Profits-Transferred to 
                reserves,goodwill,preliminary expenses,
               dividend paid etc.


              ii)Loss on sale of investment,penalties and fines.


             iii)Interest received on bank deposits,profit on sale of 
               investments,fixed assets,transfer fees. 


     2) Purely cost accounting items:- Notional Rent/Interest/Salary 


     3)Valuation of Stock:- 
              i)Raw material       = In financial accounts stock is valued at cost or market value whichever is less,
 while in cost accounts it is valued at LIFO,FIFO etc.


             ii)Work in progress = In financial accounts administrative expenses are also considered while valuing
stock but in cost accounts it may be valued at prime or factory cost or cost of production. 


            iii)Finished Goods  = In financial accounts it is valued at cost or market price whichever is less,in
cost accounts it is valued at total cost of production.


   4)Overheads:    In financial= Actual expenses are taken. In cost=Expenses are taken at predetermined rate. 


   5)Depreciation: In financial=Charged in diminishing or fixed balance method. In cost=Charged in machine hour rate.


  6)Abnormal Gains: In financial=Taken to profit and loss account. In cost=Excluded to cost accounts or charged to costing profit and loss account.
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