Page 180 - DCOM206_COST_ACCOUNTING_II

Unit 9: Cost Accounting Records

(xvi) Pollution control: Expenditure incurred by the company on various measures to protect Notes
the environment like effluent treatment, control of pollution of air, water, etc., should be
properly recorded.
(xvii) Human resources development: Expenditure incurred by the company on the human
resources development activity shall be recorded separately.

(xviii) Related party transactions: In respect of related party transactions or supplies made or
services rendered by a company to a company termed “related party relationship” as
defined below and vice-a-versa, records shall be maintained showing contracts entered
into, agreements or understanding reached in respect of:
(a) purchase and sale of raw materials, finished products, process materials and rejected
goods including scraps, etc;
(b) utilisation of plant facilities and technical know-how;
(c) supply of utilities and any other services;

(d) administrative, technical, managerial or any other consultancy services;
(e) purchase and sale of capital goods including plant and machinery; and
(f) any other payment related to production, processing or manufacturing of products
under reference.

These records shall also indicate the basis followed for arriving at the rates charged or
paid for such products or services so as to enable determination of the reasonableness of
such rates in so far as they are in any way related to product under reference.
(xix) Cost statements: The cost statements shall be prepared in the formats prescribed in Schedule
of the rules. In the case of some products like Textiles, where the number of sorts is
numerous, the rules provide for the maintenance of cost sheets on a consolidated basis, for
those varieties of cloth which do not account for a sizable percentage of total production.
Where the product is manufactured in more than one factory, the cost statements shall be
prepared separately for each factory. Separate cost sheet shall be prepared in respect of
products exported.

Note The output emerging from a process, which forms input for a subsequent process
shall be valued at the cost of production up to the previous stage.
(xx) Production and sales records: Quantitative records of all finished goods whether packed
or unpacked, showing production, issues for sales and balances of different type of the
product packs under reference, shall be maintained. The quantitative details of production
shall be maintained separately for self manufactured, third party on job work, loan license
basis etc. Separate details of sales shall be maintained for domestic sales at control price,
domestic sales at market price, export sales under advance license, export sales under
other obligations, export sales at market price, and sales to related party/inter unit transfer.
(xxi) Reconciliation of cost and financial books: The Cost statements shall be reconciled with
the financial statements for the financial year specifically indicating the expenses or incomes
not considered in the cost records or statements so as to ensure accuracy and to adjudge the
profit of the products or activities under reference with the overall profit of the company.
The variations, if any, shall be clearly indicated and explained.

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