explain the reasons for difference between cost profit and financial profit and prepare the performa reconciliation statement.?
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Reconciliation of Cost and Financial Accounts is process to find all the reasons behind disagreement in profit which is calculated as per cost accounts and as per financial accounts. There are lots of items which are shown in the profit and loss account only when we make it as per financial accounting rules.
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When cost and financial accounts are separately maintained by a concern in two different sets of books, the profit shown by cost accounts may not one for costing books and the other for financial books. Therefore, it becomes necessary that profit and loss shown by the two sets of books should be reconciled.
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