Page 178 - DCOM206_COST_ACCOUNTING_II

Unit 9: Cost Accounting Records

various industries prescribe proformae in which the cost of production of the utilities is to Notes
be maintained. The cost format given provide for furnishing on the cost of direct inputs,
labour, depreciation and other items of allocable and apportion able costs in totals as well
as in units. The details of quantities of utilities sold and consumed department-wise is also
required to be maintained so that the cost of production as well as the charge to the
various departments can be determined in a reasonable manner.
(v) Workshop, repairs and maintenance: In respect of work done in workshops and tool
rooms, the records shall indicate the basis of charging the workshop or tool room or
repairs and maintenance expenses to different cost centres or departments or plant wise.
Where maintenance work is done by direct workers of any production cost centre or
department, the wages and salaries of such workers shall be treated as direct expenses of
the respective cost centre or department. If the services are utilised for other products or
activities also, the manner of charging a share to such products or activities shall be on
equitable and reasonable basis and applied consistently.
The expenditure on major repair works from which benefit is likely to accrue for more
than one financial year shall be deferred over the period expected to benefit on a reasonable
and equitable basis and applied consistently. Such cost shall be shown separately and the
method of accounting along with the basis of allocation of such costs shall also be clearly
indicated in cost records.
(vi) Depreciation: Records shall be maintained separately showing the specific block and
apportioned block in respect of each item of asset relating to the product for which cost
accounting records are to be maintained. If a company is manufacturing more than one
product like bulk drugs, formulations and cosmetics for which common services are
available the records should show separately, the assets relating to the product say bulk
drugs and also the share of service department assets relating to the product. The basis on
which depreciation is calculated and allocated or apportioned to various cost centres or
departments and absorbed on all products shall be clearly indicated in the cost records.

!
Caution In case the amount of depreciation charged in the Cost Accounts is in excess of the
depreciation chargeable under Schedule XIV to the Companies Act, the amount so charged
in excess shall be indicated in the cost records, separately. However, the cumulative
depreciation charged in the cost records, against any individual item of asset shall not,
however, exceed the original cost of the respective asset.
(vii) Other overheads: The records shall indicate the various items of overhead expenses
chargeable to the cost centres. The expenses shall be analysed, classified and grouped
under various functions viz. works, administration, selling and distribution.
(viii) Royalty or technical know-how fee or leasing charges: The adequate records shall be
maintained showing the royalty and/or technical know-how fee including other recurring
or non-recurring payments of similar nature if any, made for the products or activities
under reference to collaborators or technology suppliers in terms of agreements entered
into with them. Such records shall be kept separately in respect of each such collaborator
or supplier. The basis of charging such amount, including lump sum payment and its
treatment shall be indicated in the cost records.

!
Caution In the case of leasing arrangements, proper records shall be maintained showing
details of terms and conditions, leasing charges paid or payable as well as received or
receivable.

LOVELY PROFESSIONAL UNIVERSITY 173