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

Which of the following items, appearing only in the financial accounts, must be ADDED to the profit as per cost accounts while reconciling it with the profit as per financial accounts?

Interest received on investments is added to the profit per cost accounts, because it is financial income that cost accounts ignore. Losses on asset sales, tax provisions and donations are financial charges not in cost accounts, so they are deducted when moving to financial profit.

  1. AInterest received on investmentsCorrect
  2. BLoss on sale of a fixed asset
  3. CProvision for income tax
  4. DDonations paid

Explanation

Interest received is a financial income not recorded in cost accounts, so it is added to cost profit to reach financial profit. Loss on sale of an asset, income tax provision and donations are financial charges that are deducted, so options B, C and D take the wrong sign.

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