A manufacturing company has disclosed net loss of ₹48,700 as per their cost accounting records for the year ended 31st March, 2026. However, their…

CA Intermediate · Cost and Management Accounting · MTP · September 2026
A manufacturing company has disclosed net loss of ₹48,700 as per their cost accounting records for the year ended 31st March, 2026. However, their financial accounting records disclosed net profit of ₹35,400 for the same period. A scrutiny of data of both the sets of books of accounts revealed the following information: (₹) (i) Factory overheads under absorbed 30,500 (ii) Administrative overheads over absorbed 65,000 (iii) Depreciation charged in financial accounts 2,25,000 (iv) Depreciation charged in cost accounts 2,70,000 (v) Income-tax provision 52,400 (vi) Transfer fee (credited in financial accounts) 10,200 (vii) Obsolescence loss charged in financial accounts 20,700 (viii) Notional rent of own premises charged in cost accounts 54,000 (ix) Value of opening stock: (a) in cost accounts 1,38,000 (b) in financial accounts 1,15,000 (x) Value of closing stock: (a) in cost accounts 1,22,000 (b) in financial accounts 1,12,500 Prepare a Memorandum Reconciliation Account by taking costing loss as base.

Suggested Answer and Working Notes:

3(b) Memorandum Reconciliation Account Dr. Particulars Amount (₹) Cr. Particulars Amount (₹) To Net Loss as per Cost Accounts 48,700 By Administration overheads over recovered in Cost Accounts 65,000 To Factory overheads under absorbed in Cost Accounts 30,500 By Depreciation overcharged in Cost Accounts (₹2,70,000 – ₹2,25,000) 45,000 To Provision for Income tax 52,400 By Transfer fees in Financial Accounts 10,200 To Obsolescence loss 20,700 By Notional Rent of own premises 54,000 To Overvaluation of closing stock in Cost Accounts** 9,500 By Overvaluation of Opening stock in Cost Accounts* 23,000 To Net Profit (as per Financial Accounts) 35,400 1,97,200 1,97,200 * Overvaluation of Opening Stock as per Cost Accounts = Value in Cost Accounts - Value in Financial Accounts = ₹1,38,000 – ₹1,15,000 = ₹23,000. ** Overvaluation of Closing Stock as per Cost Accounts = Value in Cost Accounts - Value in Financial Accounts = ₹1,22,000 – ₹1,12,500 = ₹9,500.

Topics: Cost Accounting Systems

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