Question

Choose the correct answer: When costing profit is Rs 13,500 and a charge in lieu of rent is Rs 2,000 , then the financial profit should be (a) $\operatorname{Rs} 13,500$ (b) Rs 15,500 (c) $\operatorname{Rs} 11,500$ (d) None of these

   Choose the correct answer:
 When costing profit is Rs 13,500 and a charge in lieu of rent is Rs 2,000 , then the financial profit should be
(a) $\operatorname{Rs} 13,500$
(b) Rs 15,500
(c) $\operatorname{Rs} 11,500$
(d) None of these

Cost Accounting

K. Alex 1st Edition

Chapter 9, Problem 5

Instant Answer

Step 1

"Costing profit" refers to the profit calculated based on the cost accounting method, which is Rs 13,500. A "charge in lieu of rent" is an additional cost or adjustment made to the costing profit, which in this case is Rs 2,000. Show more…

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Choose the correct answer: When costing profit is Rs 13,500 and a charge in lieu of rent is Rs 2,000 , then the financial profit should be (a) $\operatorname{Rs} 13,500$ (b) Rs 15,500 (c) $\operatorname{Rs} 11,500$ (d) None of these

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Key Concepts

Costing Profit

Costing profit refers to the profit figure calculated using cost accounting methods. It typically excludes non-operational charges or adjustments that financial accounting might include. This measure is used mainly for internal decision-making and efficiency analysis.

Financial Profit

Financial profit is the profit figure prepared for external reporting in financial statements. It takes into account all revenues and expenses, including exceptional, non-operating or imputed items, such as a charge in lieu of rent, ensuring compliance with accounting standards.

Accounting Adjustments

Accounting adjustments are modifications made to convert one profit measure to another, such as converting costing profit to financial profit. These adjustments are necessary to account for items that are not considered in internal measures but are required in the external reporting, aligning each measure with its respective accounting framework.

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