Exemplary Need For Reconciliation Of Cost And Financial Accounts

Reconciliation is the process of matching transactions that have been recorded internally against monthly statements from external sources such as banks to see if there are differences in the records and to correct any discrepancies.

Need for reconciliation of cost and financial accounts. It is less common to reconcile a revenue or expense account since the account balances are flushed out at the end of each fiscal year. This will help the firm to check the arithmetical accuracy of the data and will show the reason of difference between the accounts. To check the arithmetical accuracy of both sets of accounts as well as to detect errors and omissions committed in the accounts.

A reconciliation statement is prepared to reconcile the two different figures of profit revealed by two set of books by as pertaining the reasons for the difference but the aim of reconciliation is the only reconcile not to rectify. Where cost accounts and financial accounts are separately maintained in two different sets of books the profit or loss shown by one may not agree with that shown by other. To evaluate the reasons for variations for effective internal control.

Reconciliation of cost and financial account is needed for various reasons. In an enterprise which maintains two sets of accounts viz. With this we can find the difference in profit or loss which are shown as per cost accounts and financial accounts.

Therefore it becomes necessary that periodically the profit or. But where cost and financial accounts are maintained independent of each other it is imperative that periodically two accounts are reconciled. Reconciliation of cost and financial account is necessary for the following reasons.

In those concerns where there are no separate cost and financial accounts the problem of reconciliation does not arise. Reconciliation of Cost and Financial Accounts When cost accounts and financial accounts are maintained in two different sets of books there will be prepared two profit and loss accounts - one for costing books and the other for financial books. But when we keep our cost and financial accounts separately we need to reconciliation of cost and financial accounts like reconciliation of bank statements and cash book.

To identify the reasons for different results in two sets of accounts. The reconciliation procedure promotes the work of coordination. When cost accounts and financial accounts are maintained separately the profit shown by one set of books may not agree with that of the other set.