S.K. Manufacturing Co. Ltd. showed a net profit of 5,40,400 as per their cost accounts for the year ended 31.03.2004. However, the financial books…

(i) Statement of Reconciliation of profit as obtained under Cost and Financial Accounts (₹) (₹) Profit as per Cost Records 5,40,400 Add: Administrative Overhead over absorbed 24,000 Interest & Dividend Received 65,200 Notional rent of own premises 60,000 Stores adjustments (credited in financial books) 7,500 Depreciation over charged in cost accounts 40,000 1,96,700 7,37,100 Less: Factory overheads under absorbed 84,800 Interest paid on bank borrowings 50,000 Losses on sale of fixed assets and investments 48,000 Donations and subscriptions 18,800 Over-valuation of closing stock of finished goods in cost accounts 1,25,000 Income tax 1,50,000 (4,76,600) Profit as per Financial Records 2,60,500 (ii) Circumstances where reconciliation statement can be avoided: When the Cost and Financial Accounts are integrated - there is no need to have a separate reconciliation statement between the two sets of accounts. Integration means that the same set of accounts fulfil the requirement of both i.e., Cost and Financial Accounts.