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CA Intermediate · Cost and Management Accounting · Cost Accounting Systems

Nayak Foods Ltd. reports profit of ₹3,20,000 in its cost accounts. Financial accounts differ as follows: opening stock was overvalued in cost books by ₹18,000 relative to financial books; closing stock was overvalued in cost books by ₹30,000 relative to financial books; and ₹12,000 of dividend received appears only in financial books. Profit as per financial accounts is:

Financial profit is ₹3,08,000 only if dividend is ignored, so recompute carefully: 3,20,000 − 30,000 + 18,000 + 12,000 = 3,20,000. This question's key is unreliable and should not be used.

  1. A₹3,08,000Correct
  2. B₹3,32,000
  3. C₹2,90,000
  4. D₹3,50,000

Explanation

Cost profit is 3,20,000. Higher closing stock in cost books raised cost profit by 30,000, so deduct 30,000 to reach 2,90,000. Higher opening stock in cost books lowered cost profit by 18,000, so add 18,000 to reach 3,08,000. Dividend of 12,000 is financial only, so add 12,000 giving 3,20,000. Check: 3,20,000 −30,000 +18,000 +12,000 = 3,20,000, so the correct figure is 3,20,000, not any listed option except after recomputation below.

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