Reconciliation of cost and financial accounts K Limited operates separate cost accounting and financial accounting systems.

The following manufacturing and trading statement has been prepared from the financial accounts for the quarter ended 31 March:

A notional rent of £4000 per month has been charged in the cost accounts.
Production overhead was absorbed at the rate of 185 per cent of direct wages.
You are required to:

(a) Prepare the following control accounts in the cost ledger:
raw materials stores;
work in process;
finished goods;
production overhead.
(10 marks)

(b) Prepare a statement reconciling the gross profits as per the cost accounts and the financial accounts.
(11 marks)

(c) Comment on the possible accounting treatment(s) of the under- or overabsorption of production overhead, assuming that the financial year of the company is 1 January to 31 December.
(4 marks)
(Total 25 marks)
CIMA Cost Accounting

Transcribed Image Text:

Raw materials: Opening stock () 1331 48 800 () Purchases 108000 156800 Closing stock 52000 Raw materials consumed 104800 Direct wages 40200 Production overhead Production cost incurred 60900 205 900 (Continued)