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Cost Accounting – II

Notes Self Assessment

Fill in the blanks:
9. The Cost Accounting Records Rules merely refers to the maintenance of ……………………
Records.
10. Sub-Section (5) of Section …………………… of Companies Act, 1956 provides that if persons
responsible under the Act fails to take all reasonable steps to secure compliance or has
caused any default by his own wilful act, he shall be punishable with imprisonment for a
term which may extend to six months or with fine which may extend to ten thousand
rupees or with both.

9.5 Schedule I – Basic Provisions

Detailed provisions relating to materials, labour, overheads depreciation and other statistical
information that are required to be maintained are given in Schedule. The entire Schedule is in
a descriptive form and the companies have a discretion to maintain the data in whatever manner
of form convenient to them with the only provision that all the required information specified
in Schedule should be available. This has been made clear in the rules that the records will have
to be maintained in a form either as specified in Schedule (earlier schedule I or II) or as “near
thereto as practicable”.
Information prescribed under Schedule shall consist of:
(i) Materials:
(a) Records shall be maintained separately for the receipts, issues and balances both in
quantities and cost of each item of direct materials (including primary materials and
consumable stores) required and used in production.
(b) The cost of materials shall include all direct charges up to works.
(ii) Salaries and Wages:
(a) The company should maintain records of earnings of all employees. All direct wages
and salaries should be charged to the respective cost centres namely, production or
service cost centre. The cost for each cost centre should indicate the piece rate wages
earned, incentive wages, production bonus, overtime and other earnings of casual
labourers etc. separately.
(b) The cost idle time shall be recorded separately under classified headings indicating
the reasons thereof and the method followed for accounting of the idle time payment
shall be stated. Wages and salaries relating to capital works, shall be excluded from
the cost of production.
(c) In the case of companies adopting standard costing system the method adopted for
determining and adjusting the variances shall be indicated for arriving at the actual
cost.
(iii) Service department expenses: The service department’s costs like laboratory, transport,
dispensary, township, fire fighting security etc., shall be collected separately. These expenses
wherever significant and material shall be apportioned to relevant product or activities
on equitable and reasonable basis and applied consistently. Where these services are
utilised for other products or activities of the company also, the basis of apportionment of
such expenses to the products or activities under reference and others shall be equitable
and clearly indicated in the records and applied consistently.
(iv) Utilities: Records relating to cost of utilities like water, power, compressed air etc. shall be
maintained both in respect of quantity and value. The Cost Accounting Records Rules of

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