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    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?
    A Add ₹20,000 to cost profit Correct Answer Incorrect Answer
    B Subtract ₹20,000 from cost profit Correct Answer Incorrect Answer
    C Add ₹20,000 to financial profit Correct Answer Incorrect Answer
    D No adjustment required Correct Answer Incorrect Answer

    Solution

    Over-absorption of overheads inflates cost profits. Hence, to reconcile with financial accounts, ₹20,000 should be deducted.

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