Page 179 - DCOM206_COST_ACCOUNTING_II

Cost Accounting – II

Notes (ix) Research and development expenses: Records shall be maintained indicating the details of
R&D expenses incurred by the company separately according to the nature of development
of products i.e. existing or new product or processes, development of process of
manufacture, existing and new, design and development of new plant facilities and market
research for the existing and new products etc. The records shall also indicate the payments
made to outside parties for the research and development work.
(x) Quality control: The adequate records shall be maintained to indicate the expenses incurred
in respect of quality control department or cost centre for products or activities under
reference. Where these services are also utilised for other products of the company, the
basis of apportionment to products or activities under reference and to other products
shall be equitable and clearly indicated in the records and applied consistently.

(xi) Interest and other borrowing costs: The proper records shall be maintained for money
borrowed for each project and/or working capital and interest charge thereon. The amount
of interest and other borrowing costs shall be allocated or apportioned to the products or
activities under reference and other products or activities on a reasonable and equitable
basis, and applied consistently. The basis of further charging of the share of the interest
and other borrowing costs to the various types of such products shall also be reasonable
and equitable and the same shall be followed consistently. The basis of such allocation or
apportionment shall be spelt out clearly in the cost records and statements. Net interest
and other borrowing costs incurred for Project under execution shall be capitalised for the
period up to the date the project is ready to commence commercial activities. However,
capitalisation of borrowing costs should be suspended during extended periods in which
active development is interrupted.
(xii) Work in progress and finished stock: The method followed for determining the cost of
work in progress and finished stock of the outputs shall be indicated in the cost records so
as to reveal the cost element that have been taken into account in such computation. The
appropriate share of conversion cost up to the stage of completion shall be taken into
account while computing the cost of work in progress. The method adopted for determining
the cost of work in progress and finished goods shall be followed consistently.
(xiii) Captive consumption: If the products under reference are used for captive consumption,
proper records shall be maintained showing the quantity and cost of each item of output
transferred to other department or work centres of the company for self-consumption and
sold to outside parties separately. The rates at which the transfers are affected shall be at
cost only.
In the case of intermediates produced for captive consumption, details of cost of production
shall be maintained and this should be transferred at cost.
(xiv) Packing (primary and secondary): In case of packing of products under reference for retail
sales or retail marketing, the proper records shall be maintained showing the quantity
and cost of various packing materials and other expenses incurred on packing for marketing
of product under reference. Where such expenses are incurred in common for other products
also the basis of apportioning the expenses between the relevant products shall be clearly
indicated in the cost records and applied consistently.
(xv) Expenses or incentives on exports: The proper records showing the expenses incurred on
the export sales, if any, of the product under reference shall be separately maintained so
that the cost of export sales can be determined correctly. Separate cost statement shall be
prepared for product exported giving details of export expenses incurred and incentive
earned. In case, duty free imports of input materials are made, the cost statements should
reflect this fact.

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