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Cost Accounting – II

Notes A statement showing the total expenses incurred and income received by the company
under different heads of accounts and the share applicable to the other activities or products
shall be prepared and reconciled with the financial statement.
(xxii) Adjustment of cost variances: Where the company maintains cost records on any basis
other than actual such as standard costing, the records shall indicate the procedure followed
by the company in working out the cost of the activities and services under such system.
The cost variances shall be shown against the separate heads and analysed into material,
labour, and overheads and further segregated into quantity, price and efficiency variances.
The method followed for adjusting the cost variances in determining the actual cost of the
product shall be indicated clearly in the cost records. The reasons for the variances shall be
duly explained in the cost records and statements.

(xxiii) Records of physical verification: The records of physical verification in respect of all
items held in stock be maintained indicating the method adopted for adjustment of shortages
and surplus.

(xxiv) Statistical records: Records shall be maintained in respect of:
(a) Available machine hours, direct labour hours in each production department and
actual utilisation.

(b) Records for consumption of idle time of machines.
(c) Statement showing the reasons for loss of production due to idle time of machines.
(d) Capital employed separately indicating the fixed assets and working capital for
each item of product.
The adequate records shall be maintained to enable the company to identify the capital
employed, net fixed assets and working capital separately for different products, activities
and other products and other activities to the extent such elements are separately
identifiable. Non-identifiable items shall be allocated on a suitable and reasonable basis
to different products, activities and other products and other activities. Fresh investments
on fixed assets that have not contributed to the production or processing of products or
activities under reference during the relevant period shall be indicated in the cost records.
The records shall, in addition, show assets added as replacement and those added for
increasing existing capacity.
Whenever WTO provisions are attracted, proper records shall be maintained to identify
the competitiveness of the product in the domestic as well as global market. Adequate
statistical records shall also be maintained to identify the market share of the product
manufactured and the likely impact thereon on account of competitive goods imported
into the country.

9.5.1 Flexibility under the Records Rules

The nature of Cost Accounting Records Rules specified and required to be maintained is given
in Schedules to the Rules. There are no cost accounting methods, which can be applied uniformly
to all the units in the Industry. Therefore, based on the unique characteristics of respective
company, Cost Accounting Records Rules allow a lot of flexibility to the companies.

Example: In the case of materials, the rules do not specify the manner in which the stock
ledger has to be maintained.
The exact method of pricing of stores has not been stipulated. The method of payment of wages
is left to the discretion of the company. They can adopt piece rate method, time rate, or a

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