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Cost 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 had issued 'Cost Accounting Record Rules' in respect of number of products / industries (as listed under section 209 (1) (d) of Companies Act). Before the imposition of Statutory Cost Audit it is expected from all such concerns to observe these rules. Such an audit is imposed in respect of those products / industries which are consumer oriented 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) should maintain accounting records relating to the utilisation of materials, labour and other items of cost. Such books of account should facilitate the calculation and disclosure of cost of production and cost of sales of the products at a periodical intervals. Each book of account and the proforma prescribed by the rules should be completed within the prescribed time limit after the end of the relevant financial year of the company. The following are the main 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.

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Cost Accounting

6. Records for packing. 7. Records for research and development expenses. 8. Records for conversion cost. 9. Records for by-products. 10. 11. 12. 13. 14. 15. Records for work-in-progress and finished goods. Records for cost of production and marketing. Reconciliation of cost records with financial books. Computation of variances. Physical verification. Statistical data.

Question 2 State the areas of activity for which accounting records are to be maintained under Cost Accounting Record Rules. (May, 2001, 3 marks) Answer Areas of activity for which accounting records are to be maintained under Cost Accounting Record Rules Costing Accounting Record Rules: The Government of India had issued Cost Accounting Record Rules, in respect of number of products industries (as listed under section 209( I) (d) of Companies Act). Before the imposition of Statutory Cost Audit it was expected from all such concerns to observe these rules. Such an audit is imposed in respect of those products, industries which are consumer oriented 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) should maintain accounting records relating to the utilisation of materials, labour and other items of cost. Such books of account should facilitate the calculation and disclosure or cost of production and cost or sales of the products at a periodical intervals. Each books of account and the proforma prescribed by the rules should be completed within the prescribed time limit after the end of the relevant financial year of the company. Following records are to be

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

Rules

generally

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. 15. Physical verification. Statistical data.

Question 3 Mention any eight areas of maintenance of Cost Accounting Records. (Nov., 1994, 8 marks) Answer The eight areas (it refers to No. of products/industries) of maintenance of cost accounting records are as under:(i) Raw materials, components, stores and spare parts etc. (ii) Wages and Salaries.

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Cost Accounting

(iii)

Overheads.

(iv) Utilities. (v) Service department expenses including workshop repair and maintenance. (vi) Depreciation. (vii) (viii) Royalty / Technical knowhow fee. Research and development expenses.

Besides above, the cost accounting records may also be maintained for the following: (a) Packing expenses; (b) Interest; (c) Expenses/incentive on export; (d) Conversion Cost; (e) Captive consumption; (t) Credit for byproducts (g) Work-in-progress and finished records (i) Cost statements; goods stock; (h) Production

(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 department. (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 various elements, giving comparative figure of previous period and other plants under the same management. (ii) Consumption of material statements. (iii) Labour utilization statements, details about total number of hours paid for, standard hours for output, idle time and causes thereof. by Cost Accounting

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(iv) Overheads incurred compared with budgets. (v) Reconciliation of actual profit earned with estimated or budgeted profit. (vi) Total cost of abnormally spoiled work in the factory and abnormal loss and store. (vii) Total cost of inventory carried, number of monthly stocks would be sufficient. (viii) Labour turnover and cost of recruitment and training of new employee. (ix) Expenses incurred on R & D as compared to budgeted amount.