Question
The net profit as per cost accounts is ₹2,00,000, but
financial accounts show ₹1,80,000. Upon examination, over-absorption of overheads by ₹20,000 is identified. Which reconciliation adjustment is correct?Solution
Over-absorption of overheads inflates cost profits. Hence, to reconcile with financial accounts, ₹20,000 should be deducted.
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