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COST RECORDS AND AUDIT
ISSUED ON 30TH JUNE, 2014 vide Gazatte Notification No.GSR 425 E
Issued under section 148 of Companies Act, 2013 and suspercedes
1. Cost Accounting Record Rules 2011
2. Cost Accounting Report Rules, 2011
3. Cost Accounting Records(Eletricity Industry) Rules, 2011
4. Cost Accounting Records(Fertilizers Indusry) Rules, 2011
5. Cost Accounting Records (Pharceuticals) Industry Rules 2011
6. Cost Accounting Records (Petroleum Industry) Rules, 2011
7. Cost Accounting Records (Sugar Industry) Rules, 2011
8. Cost Accounting Records (Telecommunication industry) Rules, 2011
APPLICATION OF COST RECORDS
Companies engaged in
Companies engaged in
industry controlled by
Companies engaged in
areas of Public
Companies engaged in
supply or trading of
used in defense, space
and atomic energy
Port services Railway or Tramway
fixtures and fittings ,
Rolling Stock, Mech or
Turbo jets and turbo
profellers Arms and
Aeronautical services Mineral products
Ores, Mineral fuel,
mineral oils, base
chemicals, organic or
of precious metals,
APPLICATION OF RECORD RULES
Net worth of the Company Rs.500 crores or Turnover of Rs. 500 crores for industries engaged
in strategic sectors.
For Companies engaged in industry regulated by Sectoral regulator, and producing multi
products (turnover from single product or service) shall be Rs.50 crores.
In case of company engaged in producing single product, the net worth of the company Rs.150
crores or more or turnover is Rs.25 crores or more.
In case of Companies engaged in Public interest, the thresh hold limit shall be Rs.50 crores or
more for companies engaged in multi product company where specific product turnover .
In case of single product company the net worth of the Company is more than Rs.150 crores
or networth of the company is Rs.25 cores or more.
In case of companies engaged in producing, supplying, importing or trading of medical devices
the thresh hold limit in case of companies dealing in multi products, the turnover from single
product shall be Rs.10 crores or more or 1/3 of the total turnover of the company whichever
In case of companies engaged in dealing in single product, the product turnover to be Rs.25
crore or more or net worth of the Company is Rs.150 crores or more.
APPLICATION OF COST AUDIT
Group A – Companies engaged in Strategic sectors
Net worth Rs.500 crores or more
Turnover Rs.500 crores of more
Group B -& Group C – Companies engaged in Regulated Industry or
companies engaged in Public Interest
- In case of Multi product Companies, turnover from
individual product shall be Rs.100 crores or more
- In case of single product companies, turnover from such
individual product shall be Rs.100 crores or more or net worth
of the company is Rs.500 crores or more.
Application of cost audit – contd.
Group D - In case of companies engaged in multi product or device the
turnover of the Company is Rs.10 crores or one third of the total turnover of
the company whichever is less,
In case of Companies engaged in single product, turnover from such single
product shall be Rs.25 crores or net worth of the Company to be Rs.150
CRA 1 Form for Cost Records
1. Input Raw materials both imported and indgenous
2. Bought out Components, Sub Assemblies, accessories, semi finished
3. Consumables, Stores, spares,
4. Manufactured components
Indicating qty received, issued, balance and value thereof.
1. Salaries & wages paid and attendance records, for both permanent
employees, contact labour, overtime wages paid
2. Records to show cost centre wise allocation of salaries and wages
3. Idle time and cost of labour
4. Labour cost related to Capaital works
5. Normal retirement brenefits
1. Cost and quantity of each type of utility such as power water steam
Purchsed, produced and consumed.
2. Allocation to cost centres and further to individual producs/services
3. If any utility is major input to the raw material used in production such
utility to be included in the cost of raw material.
4. Measures taken to conserve the energy and impact on per unit cost of
SERVICE DEPARTTMENT EXPENSES:
1. All expenses incurred for service departments such as engineering,
computer cell, quality, workshop,tool room.
2. Apportionment of the expenses to production departments.
3. Cost of service rendered to related party or sold to outside parties including
distribution, marketing expenses.
REPAIRS AND MAINTENANCE:
1. Cost of repairs and maintenance in various cost centres or departments
under different heads.
2. Costs incurred in general Repairs shop, tool room
3. Stores and Spares not moved for 24 months in amount and proportion to
4. The expenditure incurred on major repairs which benefit beyond a period of
12 months are absorbed over the period over which such benefits accrue.
Indicate method of accounting and basis of allocation
FIXED ASSETS, DEPRECIATION AND LEASE CHARGES:
1. Assets used for production of goods and services indicating cost of acquisition,
installation charges and rate of depreciation.
2. The basis of apportioning of common assets to various goods and services.
3. Depreciation charged either lower or higher than the rates chargeable under
Companies Act, 2013 such excess or lower depreciation per unit cost of goods /
4. The cumulative depreciation charged in cost records shall not exceed the
original cost of the asset.
5. The assets taken on lease or given on lease showing break up of lease rent,
financial charges, depreciation paid or received
6. Any assets given or received on lease from Related parties
1. All indirecgt expenses incurred in production for goods / services analysed
into Works, Administrartion, Selling and Distribution, Head Office.
2. Any indirect expenses incurred in Foreign Exchange
3. Overheads chargeable for Capital Assets shall be identified separately.
4. Basis of apportionment of overheads to various classes such as Works,
Admin, Selling & Distribution an HO
ROYALTY AND TECHNICAL KNOW FEE
1. Royalty and Technical agreements
2. Fee paid, Royalty paid for goods / services to technology parters, recurring
sor non recurring.
3. Treatmemt of Fee paid or Royalty paid
RESEARCH AND DEVELOPMENT EXPENSES:
1. Expenses incurred for the development of existing goods / services and
development expenses incurred for new products / services
2. If development expenses are to be distributed to more than one year,
reasons and criterion for extending beyond one year.
3. Expenses incurred in foreign exchange, expenses paid to related party,
subsidy grant, incentive, credit, recoveries, penalty/damages paid and any
abnormal portion shall be indicated
4. R & D dept. expenses for providing technical know how to outsides shall be
excluded from cost of production Income for providing technical know
received shall excluded from incomes.
1. Quality control department expenses incurred
2. Expenses incurred in foreign exchange and expenses paid to related party on
account of quality control activities
3. Unabsorbed overheads and any abnormal portion
4. Income receried from related parties towards quality control activities
WORKIN PROGRESS AND FINISHED STOCK
1. The etd followed for determining cost of work in progress and finished
stock of the goods and for servicdes
2. All conversion costs incurred
1. Quality and cost of each goods / service transferred to other
2. Sold to outside parties
1, For each by product, quantitys produced, issued and balance in quantity and
2. Basis adopted for giving credit to main process
3. Expenses incurred for further processing, if any
4. Actual sales realization
5. Credits or recoveries from disposal of by products
1. Tne basis of apportioning of joint costs
2. Credit or recoveries from the disposal of joint products.
1. Packing expenses for domestic or export
2. Mateiral segregated as primary and seconday packing material
3. Basis of valuation of packing materials
4. Expenses incurred in Foreign Exchange
5. Credits / recoveries in respect of packing material
Interest an other borrowing costs:
1. Money borrowed for each product or service project and or working capitgal
and interest charges thereon.
2. The amount of net interest and other borrowing costs allocated to products
under reference and other products.
3. Borrowing costs paid or payable / received or receivable to and from
4. Penal interest or fine / damages paid
5. Prior period expenses relating to interest or borrowing costs
EXPENSES OR INCENTVES ON EXPORTS
1. Expenses incurred for export sales.
2. Separate cost statements for export sales indicatisng incentives received.
3. Export commitment licence wise and reasons for non compliance
4. If duty free imports are made the cost statements should reflect this.
1. Expenses incurred on various measures to protect environment like effluent
treatment, control of pollution of airt, water
2. Basis of distribution of pollution control expenses such costs of jobs done in
house and outsourced separately
3. Pollution control costs paid or payable to related parties
4. Foreign exchange expenses
5. Subsidy, grant, incentive, credit/reciverues
6. Any abnormal portiosn of such costs
7. Penalty and damges paid
8. Any amount receivable from pollution control agency
1. Quantitative records such as produced, issued for sale and balance quanity.
2. Packed and unpacked quantities
3. Produced by own arrangement, loan or licence details
1. Domestic sales at controlled prices, Domestic sale at market price
2. Export sales under advance licence
3. Export sales under other obligations
4. Export sales at market prices
5. Sales to Related party / inter unit company transfer
6. All above details each plant wise
7. Total sales realization as well as for unit
ANY OTHER COST ITEM
1. Any other item of cost necessary for cost of production, cost of sale and
determining margin in total and per unit
Adjustment of cost variances:
1. If Company maintains cost records other than on actual basis, such as
standard cost, record shall indicate basis of calculating cost of production.
2. Cost variances in respect of material, labour and overheads further analysed
into quantity, price and efficiency variances
3. Basis of absorbing vaiances into the cost of production.
4. Reasons for the variances to be recorded
1. Cost statements quarterly and annually showing quantititative information
for each product / service
2. Showing available capacity, actual production as per excise records,
3. Stock purchased for trading, stock and other adjustments,
4. Quantity available for sale,
6. And actual sale
7. Above details for current financial year and previous year.
8. Cost statements to show each element of cost for cost of production,
cost of sale and margin in total and per unit
9. Reconciliation of quarterly / annualaly for indirect taxes such as
Excise, Vat and CST showing assessable value, excise duty payable,
input credits availed
10. All cost statements as above for each plant or facility
11. Any other cost statements required for suitable presentation of
Costs and Profitabilitys of goods / services produced by the
RECONCILIATION OF COST AND
1. The cost statements shall be reconcilrd with financial statements for the
financial year indicating expednses or incomes not considered in the cost records
or statements for ensuring accuracy.
2. A statement showing total expenses incurred and the amount allocated to the
products under reference and other products to be reconciled with financial
1. Avialable machine hours, man hours in each cost centre and actual hours
2. Idle hours shall be analyzed
3. Capital employed, net fixed assets, working capital for the producrs under
4. Assets added as replacement and those added for increasing capacity
RECORDS FOR PHYSICAL VERIFICATION
1. Physical verification records for Raw materials, process materials, packing
materials, consumables, stores, machinery spares, chemicals, fuels, finished
goods and fixed assets.
2. Reason for shortage / surplus and method followed for adjusting same in the
cost of goods / services
RELATED PARTY TRANSACTIONS
1. Purchase /sale of raw material, consumable, finished goods including
2. Utilisation of plant facilities and technical know how
3. Supply of utilities and any other services
4. Administrative, technical, managerial or any other consultancy services;
5. Purchase and sale of capital goods including plant and machinery; and
6. Any other payment related to the production of goods/rendering of service
7. Rates charged or paid for such goods or services