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CA Intermediate · Cost and Management Accounting · Cost Accounting Systems

Under a non-integrated system, Mehta Auto Ltd shows profit of Rs 3,60,000 in its cost books. The differences noted are: closing stock in financial books is Rs 20,000 higher than in cost books; interest received Rs 25,000 appears only in financial books; overheads under-absorbed in cost books Rs 15,000 are charged only in financial books; donations Rs 10,000 appear only in financial books. What is the profit as per financial books?

Financial profit is Rs 3,80,000. Add the higher closing stock (Rs 20,000) and interest received (Rs 25,000) to cost profit, then deduct under-absorbed overheads (Rs 15,000) and donations (Rs 10,000), because those two reduce profit only in the financial books.

  1. ARs 3,80,000Correct
  2. BRs 3,60,000
  3. CRs 4,10,000
  4. DRs 3,70,000

Explanation

Cost profit 3,60,000 + higher closing stock 20,000 + interest 25,000 = 4,05,000. Deduct under-absorbed overheads 15,000 and donations 10,000 = 3,80,000. Check: net adjustment is +45,000 - 25,000 = +20,000, so 3,60,000 + 20,000 = 3,80,000. Option C ignores the two deductions' effect on only one side.

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