Reconciliation of Cost and Financial Accounts

When profit is calculated using both cost and financial accounts, a process known as a reconciliation of cost and financial accounts is necessary to resolve the discrepancy. Many items are only included in the financial statement if they are accounted for under financial accounting rules. For profit and loss accounting, many items are only included if we use cost accounting.

Assuming we’ve calculated the profit or loss using financial accounts, we’ll need to make some adjustments to reflect the actual costs. Ultimately, we see the same profits as per accounts after all adjustments are made. If we’ve made a profit based on the cost account, we’ll need to make adjustments to the financial accounts.

To aid in comprehension, the following is a collection of multiple questions and answers on the topic of Cost and Financial Accounts Reconciliation.

1.     How does a company’s bottom line suffer as a result of financial charges?

1. 1. Reduced interest rates on debt instruments
   2. Taxes imposed on the issued and transfer of securities such as bonds and stocks
   3. Losses on investment property
   4. All of the preceding

Answer: D

2. Increasing financial profits are the result of which of the following financial changes?

1. 1. Bank or investment account interest
   2. assets that have been put up for sale
   3. Receivables such as rent or dividends
   4. All of the above

Answer: D

3.     Is it true that the financial and cost accounts must be compared?

1. 1. Internal control is not improved by reconciling the cost and financial accounts.
   2. Reconciling the financial and operational accounts aids in the management of the company
   3. Reconciling the financial and operational accounts aids in external auditing.
   4. All of the above

4.     Which of the following is true of dividends paid out by a company’s stockholders?

1. 1. The dividend is only reflected in the company’s financial statements.
   2. Only in the financial accounts is the dividend reflected.
   3. The dividend is only reflected in the cost accounts for the dividends received.
   4. neither cost nor financial accounts are affected by this dividend.

Answer: B

5.     Is it correct to say that the involvement of capital is as follows?

1. 1. Earnings in the financial statement are reduced because of the interest in the capital.
   2. Earnings in the cost account are reduced by the interest on capital.
   3. Profits are slashed in both the finance and the statement such as an income because of interest on capital.
   4. Profits are unaffected by capital interest, whether in the financial or cost accounts.

Answer: A

6.     Which of the following assertions about the premium on the issuance of shares is correct about the premium?

1. 1. It is included in the financial statements’ profit and loss statement as part of the premium paid on the shares issued.
   2. The premium paid on the issuance of shares is recorded in the profit and loss statement of the cost accounting department.
   3. Amounts paid as premiums on the issue of shares are represented in the profit and loss statement of both the finance and the cost accounting departments.
   4. There is no mention of the premium paid on the issue of shares in the profit and loss statement of either the financial or the cost accounting departments.

Answer: A

7.     Which of the following claims concerning the fictitious rent is correct?

1. 1. It is represented in the financial statement of the accounting records as a fictitious rental expense.
   2. Profit and loss statements for the cost accounts include the notional rent as a component of the statement of cash flows.
   3. It appears in both the financial and cost accounts in the financial statement as a result of the notional rental expense.
   4. It is not shown in the financial statements of the financial or cost accounts since it is a fictitious rental expense.

Answer: B

8.     The undervaluation of a stock is best demonstrated by which of the below assertions is correct?

1. 1. Gains in the financial account are reduced as a result of the undervaluation of stock.
   2. The loss in value of the stock has a negative impact on profits in both the financial and cost accounts.
   3. Profits in the cost account are reduced as a result of the undervaluation of stock.
   4. The loss in value of the stock has no effect on earnings, either in the finance or in the cost accounting departments.

Answer: C

9.     The interest on investments is represented by which of the following statements is correct?

1. 1. Earnings in the cost account increase as a result of the interest on investment.
   2. Profits in both the financial and cost accounts are increased as a result of interest on investment.
   3. Gains in the financial account grow as a result of the interest earned on investments.
   4. Profits in either the financial or cost accounts do not increase as a result of interest on investment.

Answer: C

10. When it comes to the loss on the sale of capital assets, which of the following assertions is correct?

1. 1. Returns in the cost account grow as a result of a loss on the sale of a capital asset
   2. When a capital asset is sold, the loss on sale boosts profits in both the financial and cost accounts.
   3. The loss on the sale of a capital asset results in an increase in profits on the balance sheet.
   4. In either the financial or cost accounts, a loss on the sale of a financial instrument does not result in a gain in net income.

Answer: C

11. Which one of the following assertions about the interest earned on bank deposits is correct?

1. 1. It is subtracted from the pricing profit and loss account when the return on bank deposits is earned.
   2. It is credited to the pricing profit and loss account when interest is earned on bank deposits.
   3. It is subtracted from the financial profit and loss account when interest on bank deposits is earned.
   4. The interest earned on deposits is credited to the financial statement in the accounting system.

Answer: D

12. When it comes to FIFO, what is the full form?

1. 1. First inside, first-out
   2. first inside, first over
   3. first in, first out
   4. first inside, first over

Answer: C

13. Can you tell me what the complete form of LIFO is?

1. 1. Last inside first out
   2. Last inside first over
   3. Last in first out
   4. None of the above

Answer: C

14. When it comes to charitable contributions made by an organization, which of the following assertions is correct?

1. 1. The gifts received by an organization are subtracted from the pricing profit and loss account of the organization.
   2. The gifts received by an organization are attributed to the organization’s costing financial statement.
   3. Donations received by an organization are subtracted from the organization’s financial profit and loss account.
   4. The donations received by an organization are credited to the organization’s financial profit and loss statement.

Answer: C

15. The reconciliation statement includes the following information:

1. 1. It is added to the profitability to account for expenses that are only reported in the financial accounts.
   2. It is subtracted from the financial earnings of all of the expenses that are only displayed in the financial statements.
   3. The expenses that are simply represented in the financial statements have no impact on the financial profits.
   4. It is subtracted from the costing profits the expenses that are only shown in the financial statements and not in the costing profits.

Answer: A

16. Do you know how many different kinds of reconciliatory statements there are out there?

1. 1.  2
   2.  4
   3.  5
   4.  1

Answer: C
The best way to grasp the concept of account reconciliation is to look at some real-world instances of the process in action. There are five primary types of account reconciliation: bank reconciliation, customer reconciliation, vendor reconciliation, intercompany reconciliation, and business-specific reconciliation.

17. When attempting a profit reconciliation between Financial Books and Cost Accounts, the following steps are taken:

1. 1. If you begin with earnings in Financial Accounts and work your way down to costs in Cost Accounts, you will have an under absorption of overheads.
   2. If you begin with profits in accordance with Cost Accounts, you must account for under absorption costing in Cost Accounts.
   3. If you begin with earnings in Financial Accounts and work your way down, include the excess absorption of overheads in Cost Accounts.
   4. If you begin with profits in accordance with Cost Accounts, you must include the excess absorption of overheads in Cost Accounts.

Answer: A

18. Expenses that are exclusively shown in the financial accounts are

1. 1. added back to the financial profit in the Reconciliation Statement.
   2. the cost of profit has increased.
   3. is not taken into consideration.
   4.  deducted from the financial profit.
   5. subtracted from the financial profit.

Answer: A