Cost Reconciliation Statement
A cost reconciliation statement is prepared on the same footing on which a bank reconciliation statement is prepared. It is a statement recording the profit or losses shown by the cost accounts and financial account. It helps to check the arithmetical accuracy of both sets of accounts. It also helps to find out the reasons for the differences in the profit or loss in cost and financial accounts.
The preparation of cost reconciliation statement involves following Steps:
(a) Step 1: Start with profit or loss shown by any one set of accounts (profit or loss as per cost accounts or financial accounts) as the base. Start with profit or loss shown by any one set of accounts such as:
- Net profit as per cost account
- Net profit as per financial account
- Net loss as per cost account
- Net loss as per financial account
(b) Step 2: Find out the reason of the difference of profit between cost and financial account.
(c) Step 3: Determine the add or subtract items.
(d) Step 4: Prepare cost reconciliation statement.
Therefore, it becomes essential that occasionally the profit or loss shown by the two sets of accounts is reconciled. Businesses and individuals may reconcile their records daily, monthly or annually using either of these methods.