5.5 Intermediate: Preparation of cost accounts from reconciliation statement

(a) The cost accountant and the financial accountant of C Limited had each completed their final accounts for the year Shown here are the manufacturing, trading and profit and loss accounts, together with a statement reconciling the cost

(b) Complete the cost accounts for the period, by listing the missing amounts, determining the profiU(loss), and showing the balances to be carried forward to the following period.
(12 marks)

(c) Provide a brief descnption of the accounting entries numbered (i) to (xii).
and financtal profits. You are required to show the following accounts in the cost ledger:
(i) raw matenals;
(ii) work in progress;
(iii) fimshed goods;
(vi) profit and loss.

Notes:
Production overhead is absorbed at a rate of 66?13% of wages.
Administration overhead is written off in the period in which it is incurred.

(b) Discuss briefly the reasons for including in a cost accounting system notional interest on capital locked up in stock and its treatment in preparing a reconciliation of cost and financial profits.

Transcribed Image Text:

Manufacturing, trading and profit and loss account for the year ended 31 December 1981 (000) (000) (000) Raw material: Opening stock 110 Purchases 640 750 Less Returns 20 730 Closing stock 130 600 Direct wages Paid 220 Accrued 20 240 Prime cost Work in progress: 840 Production expenses 162 Opening stock Closing stock 25 27 Trading account, cost of goods manufactured (000) 1000 (2) 1000 1000 (000) (000) Finished goods: Sales (000) 1530 (2000) Opening stock 82 Less Returns 30 Manufactured 1000 1500 1082 Closing stock 72