Question

Question 4 (20 Marks) Shitapa Ltd keeps separate books for its cost and financial records. The net income shown in the cost accounts was N$20 496. Net income recorded in the cost accounts was more than the net income for accounting profit by N$1 904. A comparison of the two sets of accounts revealed the following: Inventory valuations Raw materials: Cost Accounts N$ 6 821 5 483 N$ 14 491 12 130 Financial accounts N$ 7 259 5 128 N$ 14 105 11 831 Opening inventory Closing inventory Finished goods: Opening inventory Closing inventory The following transactions were not recorded in the cost accounts: Dividends and interest received N$552 Loss on sales of milling machine Required: A. Reconcile the net income figures as shown in the two sets of accounts. (11 Marks) B. Explain the difference between integrated accounting system and interlocking accounting system (9 Marks)

Answer 1

Answer

Differences in the valuation of stock –In financial accounting stock is valued base on the lower of cost and net realizable value whole in cost accounting stock is valued based on the input cost

Requirement 1 Net income as per Cost records Less: Higher Cost of Goods Sold in accounting records Add: Dividend & Interest received Loss on sales of machine Net income as per accounting records 20,496 706) 552 1,750) Plug-in 18,592 Workin Cost Accounting Difference COGS Beginning-RM Ending-RM Beginning -FG Ending-FG 6,821 5,483) 14,491 (12,130) 3,699 7,259 5,128 14,105 11,831 4,405 706