Cost Accounting (Records) Rules

Embed Size (px)

Citation preview

  • 7/30/2019 Cost Accounting (Records) Rules

    1/5

    13Cost Accounting (Records) Rules

    Question 1

    Write a brief note on Cost Accounting Record Rules.(May, 1999, 3 marks)

    Answer

    Cost Accounting Record Rules: The Government of India hadissued 'Cost Accounting Record Rules' in respect of number ofproducts / industries (as listed under section 209 (1) (d) ofCompanies Act). Before the imposition of Statutory Cost Audit it isexpected from all such concerns to observe these rules. Such anaudit is imposed in respect of those products / industries which areconsumer oriented and earners of high profit margin. According tothese rules, all companies engaged in activities of production ormanufacturing, etc. (for which cost accounts records have beenprescribed) should maintain accounting records relating to theutilisation of materials, labour and other items of cost. Such books ofaccount should facilitate the calculation and disclosure of cost ofproduction and cost of sales of the products at a periodical intervals.Each book of account and the proforma prescribed by the rulesshould be completed within the prescribed time limit after the end ofthe relevant financial year of the company. The following are themain requirements of Cost Accounting (Records) Rules generally

    applicable to various industries in India. .

    1. Records for raw materials.

    2. Records for labour.

    3. Records for overheads.

    4. Records for utilities / services.

    5. Records for fixed assets.

  • 7/30/2019 Cost Accounting (Records) Rules

    2/5

    Cost Accounting

    6. Records for packing.

    7. Records for research and development expenses.

    8. Records for conversion cost.

    9. Records for by-products.

    10. Records for work-in-progress and finished goods.

    11. Records for cost of production and marketing.

    12. Reconciliation of cost records with financial books.

    13. Computation of variances.

    14. Physical verification.

    15. Statistical data.

    Question 2

    State the areas of activity for which accounting records are to bemaintained under Cost Accounting Record Rules.

    (May, 2001, 3 marks)

    Answer

    Areas of activity for which accounting records are to bemaintained under Cost Accounting Record Rules

    Costing Accounting Record Rules: The Government of India hadissued Cost Accounting Record Rules, in respect of number ofproducts industries (as listed under section 209( I) (d) of CompaniesAct). Before the imposition of Statutory Cost Audit it was expectedfrom all such concerns to observe these rules. Such an audit isimposed in respect of those products, industries which are consumeroriented and earners of high profit margin. According to these rules,

    all companies engaged in activities of production or manufacturing,etc. (for which cost accounts records have been prescribed) shouldmaintain accounting records relating to the utilisation of materials,labour and other items of cost. Such books of account shouldfacilitate the calculation and disclosure or cost of production andcost or sales of the products at a periodical intervals. Each books ofaccount and the proforma prescribed by the rules should becompleted within the prescribed time limit after the end of therelevant financial year of the company. Following records are to be

    13.2

  • 7/30/2019 Cost Accounting (Records) Rules

    3/5

    Cost Accounting (Records) Rules

    maintained under Cost Accounting (Record) Rules generallyapplicable to various industries in India.

    1. Records for raw materials, components. stores & spare parts.

    2. Records for labour.

    3. Records for overheads.

    4. Records for utilities / services.

    5. Records for fixed assets.

    6. Records for packing

    7. Records for research mid development expenses.

    8. Records for conversion cost.

    9. Records for by-products.

    10. Records for work-in-progress and finished goods.

    11. Records for cost of production and marketing.

    12. Reconciliation of cost records with financial books.

    13. Computation of variances.

    14. Physical verification.

    15. Statistical data.

    Question 3

    Mention any eight areas of maintenance of Cost AccountingRecords.

    (Nov., 1994, 8 marks)

    Answer

    The eight areas (it refers to No. of products/industries) ofmaintenance of cost accounting records are as under:-

    (i) Raw materials, components, stores and spare parts etc.

    (ii) Wages and Salaries.

    13.3

  • 7/30/2019 Cost Accounting (Records) Rules

    4/5

    Cost Accounting

    (iii) Overheads.

    (iv) Utilities.

    (v) Service department expenses including workshop repair andmaintenance.

    (vi) Depreciation.

    (vii) Royalty / Technical knowhow fee.

    (viii) Research and development expenses.

    Besides above, the cost accounting records may also be maintainedfor the following:

    (a) Packing expenses; (b) Interest; (c) Expenses/incentive on export;

    (d) Conversion Cost; (e) Captive consumption; (t) Credit for by-products

    (g) Work-in-progress and finished goods stock; (h) Productionrecords (i) Cost statements;

    (j) Reconciliation with financial accounts and adjustment of cost

    variances;

    (k) Stock verification records; (l) Inter-company transactions;

    (m) Statistical Statements and other records.

    Question 4

    Discuss the various reports provided by Cost Accountingdepartment. (Nov, 2007, 4 marks)

    Answer

    The following are the various Reports provided by Cost Accounting

    Department:

    (i) Cost sheet setting out the total cost, analysed into variouselements, giving comparative figure of previous period and otherplants under the same management.

    (ii) Consumption of material statements.

    (iii) Labour utilization statements, details about total number ofhours paid for, standard hours for output, idle time and causesthereof.

    13.4

  • 7/30/2019 Cost Accounting (Records) Rules

    5/5

    Cost Accounting (Records) Rules

    (iv) Overheads incurred compared with budgets.

    (v) Reconciliation of actual profit earned with estimated or budgetedprofit.

    (vi) Total cost of abnormally spoiled work in the factory andabnormal loss and store.

    (vii) Total cost of inventory carried, number of monthly stockswould be sufficient.

    (viii) Labour turnover and cost of recruitment and training of newemployee.

    (ix) Expenses incurred on R & D as compared to budgeted amount.

    13.5