ILLUSTRATION 8 (When profits as per financial and cost accounts are given). Red Ltd. made a profit of $20,000 during the year 2018 as per their costing system, whereas their Final Accounts disclose a profit of $15,000. From the following Profit and Loss Account for the year ended 31st December, 2018 as per the financial books, you are required to prepare a Reconciliation Statement showing the causes for this difference : PROFIT AND LOSS ACCOUNT $ To Opening Stock of Finished Goods 1,00,000 By Sales 1,75,000 To Purchases 80,000 By Closing Stock of Finished Goods 80,000 To Direct Wages 20,000 To Factory Expenses 15,000 To Gross Profit c/d 40,000 2,55,000 2,55,000 To Administrative Expenses 10,000 By Gross Profit b/d 40,000 To Selling Expenses 15,000 To Net Profit 15,000 40,000 40,000 Costing records show the following: (a) Stock Ledger Closing Balance $8900; (b) Direct Labour $23,00; (c) Factory Overheads $13,00; (d) Administrative overheads and selling expenses each are calculated at 8 per cent of sales separately