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

Costing profit is ₹3,50,000. Financial books show: dividend received ₹20,000, donations paid ₹8,000, profit on sale of investments ₹15,000, and the costing records charged notional rent of ₹12,000 on owned premises (no actual rent paid). Starting from costing profit, what is the financial profit?

Financial profit is ₹3,89,000. Add dividend ₹20,000, profit on investments ₹15,000 and notional rent ₹12,000, which was charged only in cost accounts, then deduct donations ₹8,000. The net addition is ₹39,000 over costing profit of ₹3,50,000.

  1. A₹3,89,000Correct
  2. B₹3,77,000
  3. C₹3,65,000
  4. D₹3,41,000

Explanation

Add: dividend 20,000 + profit on investments 15,000 + notional rent charged only in costing 12,000 = 47,000. Deduct donations 8,000. Financial profit = 3,50,000 + 47,000 − 8,000 = 3,89,000. Option ₹3,77,000 results from deducting the notional rent instead of adding it.

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