A cost reconciliation schedule represents a schedule showing that the total costs accounted for are equal to the total costs to be accounted for.
Cost reconciliation is a production report’s part showing what costs a department should account for during a period and the way those costs should be accounted for. The business concerns, having the separate cost and financial accounts should reconcile two accounts periodically. Both accounts books are dealing with the same transactions but the profit figure disclosed by the former may not match with that disclosed by the second. So, reconciliation between the two account books’ results is essential because of the following causes:
- For finding out the causes of the difference in profit/loss in cost and financial accounts and for indicating the situation clearly and for being sure that no mistakes regarding accounts have been made.
- For ensuring the reliability and mathematical accuracy of cost accounts for having cost control, cost ascertainment, and for having a check on the cost and financial accounts.
- For contributing to the standardization of policies relating to depreciation, stock valuation, and overheads.
- For facilitating coordination and promoting improved coordination between the functions of cost and financial sections of the accounts department.
- For placing management in a better position for acquainting itself with the causes of differences in profits and ensuring effective and improved internal control.
This cost reconciliation can be done in one of the following ways:
- a) By making a cost reconciliation schedule and
- b) By making a memorandum reconciliation account.
Use of the term in Sentence:
- The management has asked the accounting department of the company to prepare a cost reconciliation schedule.