A manufacturing company disclosed a net loss of 6,40,000 as per their cost accounts for the year ended 31st March, 2025. However, the financial…

CA Intermediate · Cost and Management Accounting · MTP · May 2026
A manufacturing company disclosed a net loss of 6,40,000 as per their cost accounts for the year ended 31st March, 2025. However, the financial accounts showed a net profit of 45,000 for the same period. Upon scrutiny of both sets of accounts, the following differences were identified: Particulars Amount (in ₹) (i) Transfer fee received 23,000 (ii) Interest on investment received 3,00,000 (iii) Goodwill written-off 38,000 (iv) Depreciation Charged in Financial books 5,00,000 Recovered in Cost books 6,00,000 (v) Opening stock of raw material Cost books 4,50,000 Financial books 4,82,000 (vi) Closing stock of finished goods Cost books 12,80,000 Financial books 13,56,000 (vii) Notional rent of own premises recorded in Cost accounts 3,20,000 (viii) Factory overheads Cost books 2,50,000 Financial books 1,94,000 (ix) Income-tax provided 1,20,000 You are required to PREPARE Memorandum Reconciliation Account.

Suggested Answer and Working Notes:

Memorandum Reconciliation Account Debit Amount (₹) Credit Amount (₹) Net loss as per costing books 6,40,000 Transfer fee recorded in financial books 23,000 Goodwill written off not recorded in cost books 38,000 Interest on investment not included in costs 3,00,000 Under valuation of opening stock in cost accounts 32,000 Depreciation overcharge in cost books 1,00,000 Income tax not provided in costs 1,20,000 Under valuation of closing stock (finished goods) in cost accounts 76,000 Net profit as per financial books 45,000 Notional rent charges in cost books 3,20,000 Factory overheads over recovered in cost books 56,000 Total 8,75,000 Total 8,75,000

Topics: Cost Accounting Systems

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