Question

While reconciliation of cost and financial accounts for calculating profits as per Financial Accounts from Profits as per Cost Accounts, which of the following purely financial items are deducted? A. Interest on loans or bank mortgages
B. Interest received on bank deposits, loans and investments
C. Expenses and discounts on issue of shares, debentures etc.
D. Loss by fire not covered by insurance
E. Rent Receivables

• A. A and C only
• B. A, C and D only
• C. B and E only
• D. C, D and E only

Hint:

Logic Tip: Financial expenses are deducted while financial incomes are added during reconciliation.

Answer 1

The Correct Option is B

Step 1:
While converting profit as per Cost Accounts into profit as per Financial Accounts, purely financial expenses are deducted.

Step 2:
Purely financial expenses include:
• Interest on loans
• Discount on issue of shares/debentures
• Abnormal losses like fire loss

Step 3:

• Interest received
• Rent receivable These are added, not deducted.

Step 4:
Therefore, deducted items are: \[ A,\; C,\; D \] Hence, the correct answer is: \[ \boxed{\text{(2) A, C and D only}} \]