CA Inter P4 · Chapter 7 · Question 7 of 8
Profit as per financial accounts is ₹2,85,000. Factory overheads were under-absorbed in cost accounts by ₹14,000, administration overheads were over-recovered in cost accounts by ₹6,000, and preliminary expenses of ₹10,000 were written off only in financial accounts. Profit as per cost accounts is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) ₹3,03,000
Explanation
Working from financial profit to cost profit: under-absorbed factory overheads mean cost accounts charged less, so cost profit is higher: add ₹14,000. Over-recovered administration overheads mean cost accounts charged more: deduct ₹6,000. Preliminary expenses reduced only financial profit: add ₹10,000. Cost profit = 2,85,000 + 14,000 - 6,000 + 10,000 = ₹3,03,000.
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