S. Banerjee
(Practising Cost Accountant. Core area- Central Excise. Service Tax Costing system installation including maintenance of Cost Records and Cost Audit and Management Audit mainly Revenue leakages Audit)
(622 Points)
Replied 21 November 2010
Mr Sameer,
You are to maintain the following records:
(i) Materials → Raw material, processed material, consumable stores, etc.
→ Purchased, issued and balance.
→ Cost to include all direct charges upto works.
→ Separate records for wastage, spoilage losses, etc.
→ Method to adjust the loss.
→ Method of valuation actual or standard costing.
(ii) Manufactured components & Intermediaries :
→ Separate records
→ Quantity and value
→ Wastage
(iii) Stores and Spare Parts :
→ Receipt, issues and balances.
→ Quantity and value.
→ All direct charges upto works
→ Used should be charged to relevant head.
→ Wastage separately shown.
(iv) Wages and Salaries :
→ Proper Records to show attendance and earnings.
→ Records to show overtime wages, piece rate wage earned, incentive wages and
earnings of casual labourer.
→ Idle time.
→ Extent of wages and salaries capialised.
(v) Overheads :
→ Proper maintenance of records.
→ Classified under works, Administration and selling and distribution overheads.
→ Allocation of or. to deptt., etc.
→ If allocation on method other than actuals the variation and its treatment.
(vi) Service deptt. Expenses including Expenses on utilities :
→ Expenses on power, fuel, water and steam (purchased or generated)
→ Expenses on subsidized canteen.
→ Maintenance deptt. Expenses.
→ Allocation on reasonable basis.
(vii) Depreciation :
→ Cost, date of installation, rate of depreciation, and amount of depreciation provided.
→ Old assets.
→ Minimum rate of depreciation in Company Act.
→ AS-6.
(viii) Packing : → Quantity and cost of packing material.
→ Wages and other expenses on packing.
→ Income received by sale/disposal of spoiled, rejected waste materials.
(ix) By-products :
→ Proper records.
→ Receipt, issues and Balances (quantity and value).
→ Basic of Valuation.
→ Sales realization.
→ Expenses on further process of by-product.
(x) Production and Sales :
→ Records (quantity and value)
→ Separate records of packed and unpacked finished goods.
→ Records of Sales and inventory.
(xi) Inventories : → Classified as raw materials, stores and spare parts WIP and finished goods.
→ Separate records (quantity and value).
→ Physically verified.
→ Reasons for shortage and excess.
→ Method to determine cost of WIP and finished goods.
→ Methods to be followed consistently.
(xii) Variances : → If Standard Costing i.e. other than actuals then procedure followed to work out cost of the products.
→ Reasons for variances.
(xiii) Cost Statements :
→ As part of cost records.
→ w.r.t. each product.
→ Form of cost sheet (prescribed).
(xiv) Reconciliation of Cost and Financial Account :
→ To ensure accuracy.
→ Variations clearly indicated an explained.
→ Period of reconciliation < financial year of company.
→ Difference between sales realization and total cost and then it is reconciled with financial P&L A/c. for the period.
→ Specific information in Both A/c. not to be different.
(xv) Royalty : → Records of Royalty paid.
→ With terms of agreement.
→ Basis of computation.
→ Allocation to different cost centers, etc.
→ If it is a direct charge or overhead.
(xvi) Statistical Records :
→ Plant utilization, idle machine time, capital employed, capital W.I.P.
→ Percentage of different raw materials.
→ To have control over various operations and costs.
(xvii) Inter – Company transfer :
→ Normally, no inter co. transfer below cost.
→ Ensure against shifting of profits between corporate investors.
→ Proper valuation of inter-company transfer to generate revenue (duty and tax).
2. Industrial Alcohol is covered under Cost Audit.
Welcome for any other queries. Pl contact at my e.mail.
S. Banerjee
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