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