(a) There are 3 steps involved in the procedure for reconciliation.
i.
Ascertainment of profit as per Financial Accounts
ii.
Ascertainment of profit as per Cost Accounts
iii. Reconciliation of both the profits
Circumstances where reconciliation statement can be avoided: When
the Cost and Financial Accounts are integrated - there is no need to have a
separate reconciliation statement between the two sets of accounts.
Integration means that the same set of accounts fulfil the requirement of
both i.e., Cost and Financial Accounts.
(b)
Service industry
Cost Unit
Oil
Cost per barrel, Cost per gallon/litre
Professional Services
Per service/project, per hour
COST AND MANAGEMENT ACCOUNTING
Education
Per course, per student, per batch, per lecture etc.
Brick-making
Per brick, per thousand bricks
Engineering
Per project, per hour, per job, per contract
Electricity
Per kilowatt-hour (kWh)
Hotel/Catering
Guest Days or Room Days, Per item, per meal etc.
Coal Mining
Per ton, per quintal
Brewing
per gallon/litre, per barrel
Hospital
Patient per day, room per day or per bed, per
operation etc.
(c) The problem of controlling selling & distribution overheads can be tackled
by adopting the following steps:
(a) Comparison with past performance - Comparing the figures of selling
& distribution overhead with the figures of previous period.
(b) Budgetary Control-Selling & distribution overhead budgets may be
used to control such overhead expenses by making a comparison of
budgetary figures with actual figures of overhead expenses,
ascertaining variances and finally taking suitable actions,
(c) Standard Costing - Standards of selling & distribution expenses may
be set up for salesmen, territories, products etc. The laid down
standards on comparison with actual overhead expenses will reveal
variances, which can be controlled by suitable action.
OR
(c)
Cost of the Service Departments Basis
Planning and progress
Direct labour hours, Machine hours,
Direct labour wages, Asset value x
Hours worked
Transport Department
Crane hours, Truck hours, Truck
mileage, Truck tonnage, Truck ton-
hours, Tonnage handled. No. of
packages of Standard size
Personnel Department
No of direct workers
No. of employees etc.
Fire Protection
Capital values
Power House (electric lighting cost) Floor area, Cubic content, No. of
electric Points, Wattage.
Computer Section
Computer hours, Specific allocation
to departments
Canteen and Welfare
No of direct workers
No. of employees etc.
Hospital and Dispensary
No of direct workers
No. of employees etc.