Why is it necessary to reconcile the Profits between the Cost Accounts and Financial Accounts?

6(a) Why is it necessary to reconcile the Profits between the Cost Accounts and Financial Accounts? When the cost and financial accounts are kept separately, it is imperative that these should be reconciled, otherwise the cost accounts would not be reliable. The reconciliation of two set of accounts can be made, if both the sets contain sufficient detail as would enable the causes of differences to be located. It is therefore, important that in the financial accounts, the expenses should be analysed in the same way as in cost accounts. It is important to know the causes which generally give rise to differences in the costs & financial accounts. These are: (i) Items included in financial accounts but not in cost accounts Income-tax Transfer to reserve Dividends paid Goodwill / preliminary expenses written off Pure financial items Interest, dividends Losses on sale of investments Expenses of Co's share transfer office Damages & penalties (ii) Items included in cost accounts but not in financial accounts Opportunity cost of capital Notional rent (iii) Under / Over absorption of expenses in cost accounts (iv) Different bases of inventory valuation Motivation for reconciliation is: To ensure reliability of cost data To ensure ascertainment of correct product cost To ensure correct decision making by the management based on Cost & Financial data To report fruitful financial / cost data.