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CMA Intermediate · Cost Accounting · Reconciliation of Costing and Financial Profit

A manufacturing firm's cost accounts show a profit of ₹4,80,000. Which of the following items, found only in the financial books, should be ADDED to the costing profit while reconciling it to the financial profit?

Interest received on investments is added to costing profit. It is a financial income recorded only in the financial books and not in cost accounts. Losses, tax provisions and debenture interest are financial charges excluded from costing, so they are deducted when moving to financial profit.

  1. AInterest received on investmentsCorrect
  2. BLoss on sale of a machine
  3. CIncome-tax provision for the year
  4. DInterest paid on debentures

Explanation

Financial incomes such as interest received are not recorded in cost accounts, so they are added to costing profit to arrive at financial profit. The other three items are financial charges or losses that are absent from the cost accounts and would be deducted.

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