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CA Intermediate · Cost and Management Accounting · Cost Accounting Systems

Which of the following is a reason for a difference between profit as per cost accounts and profit as per financial accounts?

Notional rent on owned premises is charged only in cost accounts as an imputed cost and is not an actual expense in financial books. This creates a difference between the two profits, so it must be adjusted in the reconciliation statement.

  1. ABoth sets of books use identical stock valuation and overhead absorption
  2. BNotional rent on owned premises charged in cost accounts but not in financial booksCorrect
  3. CBoth books record the same income from all sources
  4. DBoth treat abnormal losses identically

Explanation

Notional items such as imputed rent or interest on own capital are charged in cost accounts only, causing differences. The other options describe situations with no difference.

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