TaxTMI 
TaxTMI 
TaxTMI 
Companies (Cost Records and Audit) Rules, 2014 amended….
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....ompanies (Cost Records and Audit) Rules, 2014 amended….<br>By: - DR.MARIAPPAN GOVINDARAJAN<br>Corporate Laws / IBC / SEBI<br>Dated:- 7-1-2015<br><br>Introduction Ministry of Corporate Affairs brought out a Rule called as 'Companies (Cost Records and Audit) Rules, 2014 vide Notification No. 425(E), dated 30.06.2014 in superssion of erstwhile Cost Accounting Record Rules. The said Rule has been modified extensively on the basis of representations received from Institute of Cost Accountants of India and the stakeholders, deliberations and recommendations made by the Expert Committee constituted by the Ministry of Corporate Affairs. The Ministry of Corporate Affairs brought out an amendment to the original Rule on 31.12.2014. New definition Clause 2(i) of Amendment Rule provides for the insertion of new Rule 2(aa) giving definition for 'Central Excise Tariff Act Heading' as the heading as referred to in the Additional Notes in the First Schedule to the Central Excise Tariff Act, 1985. Application of Cost Records Clause 2(ii) of the Amendment Rule substituted the erstwhile Rule 3. The erstwhile Rule 3, for the purpose of maintaining Cost Records divi....
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....ded the companies, including foreign companies into four categories as detailed below: * Companies engaged in the production of goods in strategic sectors; * Companies engaged in an industry regulated by a Sectoral Regulator or a Ministry or Department of Central Government; * Companies operating in areas involving public interest; * Companies (including foreign companies other than those having only liaison offices) engaged in the production, import and supply or trading of medical devices. The erstwhile Rule 3 fixed threshold limit for maintaining cost records as detailed below: For A group companies the threshold limit is - the net worth of the company Rs. 500 crores or more; or the turnover - Rs. 500 crores or more; For B Group companies, the threshold limit is - * In the case of a multi-product or a multi services company i.e., a company producing more than one product or service, any product or a service for which the individual turnover is Rw.50 crore or more; * In the case of a company, producing any one specific product or service, if the net worth of the company is Rs. 150 crores or more or the turnover is Rs. 25 crores or more; For C G....
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....roup companies, the threshold limit is- * In the case of a multi-product or a multi services company, any product or a service for which the individual turnover is Rs. 50 crores or more; * In the case of a company producing any specific product or service, if the net worth of the company is Rs. 150 crores or more or the turnover is Rs. 25 crores or more. For D Group companies, the threshold limit is- * In the case of a company engaged in multiple products, any product or device for which the individual turnover is Rs. 10 crores or more or one third of the turnover whichever is less; * In the case of a company engaged in one specific product or device, if it has net worth of Rs. 150 crores or more or the turnover is Rs. 25 crores or more. The newly substituted Rule 3 divides the company into two categories as- * Regulated Sectors - Telecom, Electricity, Petroleum products, Drugs and Pharmaceuticals, fertilizers and sugar and industrial alcohol; * Non regulated sectors - 33 industry/sector/product/service are included. The threshold limit for maintaining cost records for the above said categories is Rs. 35 crores or more during the immediately preceding financial....
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.... year. The proviso to Rule 3 provides that nothing in Serial No. 33 of the B - Non regulated sectors (Production, import and supply or trading of medical devices) shall apply to foreign companies having only liaison offices. The second proviso to Rule 3 provides that nothing contained in Rule 3 shall apply to a company which is classified as a micro enterprise or a small enterprise including as per the turnover criteria under Section 7(9) of the Micro, Small and Medium Enterprises Development Act, 2006. Applicability for Cost Audit Clause 2(iii) of the amended Rule for the substitution of new Rule 4 for the erstwhile Rule 4. Rule 4 deals with the applicability of cost audit. The erstwhile Rule 4 provides that in case of a multi product or a multi services company specified in clause B(b) and C(B) of Rule 3, the requirement for cost audit shall apply to a product or a service for which the individual turnover (from such specific product or such specific service) is Rs. 100 crores or more; In the case of a company producing any one specific product or service specified in Clause B (b) and Clause C(b) of Rule 3, the requirement for cost audit shall apply if the net w....
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....orth of the company is Rs. 500 crores or more or the turnover from such product or such service is Rs. 100 crores or more. In the case of D category companies the threshold limit for cost audit is as detailed below: * Which has multiple products or devices (i.e., a company producing, importing and supplying or trading in more than one medical device or product) the requirement for cost audit shall apply to a medical device or product for which the individual turnover (from such specific medical device or product) is Rs. 10 crore or more, or one third of the turnover, whichever is less; * Which has only one product or device (i.e., a company producing, importing and supplying or trading one medical service or product), the requirement for cost audit shall apply if the net worth of the company is Rs. 150 crore or the turnover is Rs. 25 crores or more. The newly substituted Rule 4 provides that - * Every company specified in item A of Rule 3 shall get its cost records audited if the overall annual turnover of the company from all its products and services during the immediately preceding financial year is Rs.50 crore or more and the aggregate turnover of the individual product....
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.... or products or service or services for which cost records are required to be maintained is Rs.25 crores or more; * Every company specified in item B of Rule 3 shall get its cost records audited if the overall annual turnover of the company from all its products and services during the immediately financial year is Rs. 100 crore or more and the aggregate turnover of the individual product or products or service or services for which cost records are required to be maintained is Rs.35 crore or more. Non applicability of cost audit The requirement of cost audit under Rule 4 shall not apply to a company which is covered in Rule 3 and- * Whose revenue from exports, in foreign exchange, exceeds 75% of its total revenue; or * Which is operating from a special economic zone. Maintenance of records Rule 5 deals with maintenance of records. Rule 5(1) provides that every company under these rules including all units and branches thereof, shall, in respect of each of its financial year commencing on or after 01.04.2014, maintain cost records in Form - CRA 1. Clause 2(iv) of the amendment Rule inserted a proviso to Rule 5(1). The newly inserted proviso provides tha....
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....t in case of company covered in Sl. No. 12 and Sr. 24 to 32 of item (B) of Rule 3, the requirement under this rule shall apply in respect of each of its financial year commencing on or after 01.04.2015. Sl. No. 12 - Coffee and tea; Sl. No. 24 - Milk power; Sl. No. 25 - Insecticides; Sl.No. 26 - Plastics and Polymers; Sl. No.27 - Tyres and tubes; Sl. No. 28 - Paper; Sl. No. 29 - Textiles; Sl. No. 30 - Glass; Sl. No. 31 - Other machinery; Sl. No.32 - Electrical or electronic machinery. Appointment of Cost Auditor Rule 6 provides for the appointment of Cost audit, its procedure and the return to be filed before the Registrar of Companies. Rule 6(3) provides that every cost auditor appointed as such shall continue in such capacity till the expiry of 180 days from the closure of the financial year or till he submits the cost audit report, for the financial year which he has been appointed. Clause 2(v) of the amendment Rule inserted sub Rule 6(3A) after Rule 6(3). The newly inserted Rule 6(3A) provides that any casual vacancy in the office of a cost auditor, whether due to resignation, death or removal, shall be filled by the Board of Directors within 30 da....
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....ys of occurrence of such vacancy and the company shall inform the Central Government in Form CRA - 2 within 30 days of such appointment of Cost Audit. Omission of Rule 7 Clause 2(vi) of the amendment Rule omitted erstwhile Rule 7 which provides for which companies the rules would not apply. Substitution of Forms Clause 2(vii) substituted the Forms CRA-1 and CRA -3. CRA - 1 Form The CRA-1 form is to be filed before RoC pursuance to Rule 5(1) of the Rules. The following are the particulars relating to the items of costs to be included in the Books of Accounts: * Material costs; * Employee costs; * Utilities; * Direct expenses; * Repairs and maintenance; * Fixed assets and depreciation; * Overheads; * Administrative overheads; * Transportation cost; * Royalty and Technical know-how; * Research and Development Expenses; * Quality control expenses; * Pollution control expenses; * Service department expenses; * Packing expenses; * Interest and financing charges; * Any other item of cost; * Capacity determination; * Work-in-progress and finished stock; * Captive consumption; * By-products and Joint products; * Prope....
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....r records up to the point of separation of products or services; * Adjustment of cost variances; * Reconciliation of cost and financial accounts; * Related party transactions; * Expenses or incentives on exports; * Production records; * Sales records; * Cost statements; * Statistical records; * Records of physical verification. Form CRA - 3 Form CRA -3 is the form of the cost audit report. The cost audit report shall be duly signed by the cost auditor. The cost audit report shall be annexed with the following: * Part - A * General Information; * General details of Cost Auditor; * Cost Accounting Policy; * Product/Service details for the company as a whole; * Part - B - for manufacturing sector * Quantitative information; * Abridged cost statement; * Details of material consumed; * Details of utilities consumed; * Details of industry specific operating expenses; * Part C - For service Sector * Quantitative information; * Abridged cost statement; * Details of materials consumed; * Details of utilities consumed; * Details of industry specific operating expenses; * Part D * Product and service profitability sta....
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....tement; * Profit reconciliation; * Value addition and distribution of earnings; * Financial position and ratio analysis; * Related party transactions * Reconciliation of indirect taxes The Annexure shall be signed by the Cost audit, Company Secretary/Director and the Director. Reply By Debtosh Dey as = New cost audit rules are welcome ! Cost audit can be very helpful to tax authorities, bankers and others concerned if regulated on scientific terms to examine normal expenditure for a given income, regard being had to capital employed. In the process, wasteful expenditure is identified enabling the enterprise to augment cost competitiveness and profitability. Thus, ultimately cost audit benefits shareholders, consumers and society at large. Cost accounts and cost audit have special significance with respect to valuation of related party transactions referred to in section 188(1) of the Companies Act, 2013, specially where fair market price is unknown. Central Excise, Service Tax, Customs and many State VAT laws have close resemblance with the c....
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....oncept of "arm's length pricing" under Income Tax Act (Section 92C) where Cost plus basis for fair price determination, is adopted besides other basis. India is probably the first country to introduce cost audit on some Govt contracts way back in 1925 and under Companies Act, 1956 initially for a few industries like cement, sugar, textiles, automobiles, etc. With growing importance of cost audit, more and more industries were covered till 2011-12 when cost audit got its widest coverage. By this time, Cost Audit Reports were being increasingly referred to by tax authorities and cited in various suits for protecting revenue. Cost auditor is an invitee to Audit Committee of the company, were such Committee is required to be formed under Companies Act. Global financial scams prompted progressive countries to revisit financial reporting standards and corporate governance and introduce parallel independent audits besides financial audit. Cost audit is also emerging as an useful parallel audit that presupposes cost accounting which can infuse various scientific tools like technical estimates, quantitative techniques, work study, systems analysis, etc besides accounting. Such infusion is....
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.... necessary for meaningful integration of non-financial data with accounts for managerial planning and control including performance evaluation. It is worth mentioning that secretarial audit has also been introduced as another parallel audit for certain companies in Companies Act, 2013. Debtosh Dey, M.Sc (Engg), FIE, C. Engg(I), FCMA, FCS, LL.B. Dated: 8-1-2015 ============= Document 1 Form of intimation of appointment of cost auditor by the company to Central Government FORM CRA-2 [Pursuant to rule 6(2)] Note - All fields marked in are to be mandatorily filled. 1.(a) *Corporate identity number (CIN) or foreign company registration number (FCRN) of the company (b) Global location number (GLN) of company 2.(a) Name of the company 3. (b) Address of the registered office or of the principal place of business in India of the company (c) e-mail ID of the company (d) *Phone *Good/s or service/s to which cost audit relates 4. Details of the cost auditor appointed (a) Name of proprietorship, partnership firm or LLP appointed as cost auditor as per Board's resolution (b) (i) *Address Line (ii) *City (iii) *State (iv) Country (v) *Pin code Line II (c) *Details o....
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....f the member representing the above firm (i) Name (iii) Membership number (d) e-mail ID of the firm or member * Page 21 of 54 * 5. Financial year to be covered under cost audit (a) *From( (b) *To( DD/MM/YYYY) DD/MM/YYYY) 6. *Date of meeting of Board of Directors appointing the cost auditor 7. (a) Is there any change in the cost auditor Yes â—‹ No (b) If yes, name and address of previous auditor (c) Reasons for change of the auditor (d) Whether the previous cost auditor has been informed of the change res Attachments 1. *Copy of the Board resolution of the company 2. *Optional attachment(s) - if any â—‹ No (DD/MM/YYYY List of attachments Page 22 of 54 Verification To the best of my knowledge and belief, the information given and its attachments is correct and complete. I have been authorised by the Board of Directors' resolution number to sign and submit this intimation. dated (DD/MM/YYYY) I am authorised to sign and submit this intimation. To be digitally signed by Any Key Managerial personnel or an officer of the company duly authorized by the Board in this behalf (in case of Indian company) or authorised representative (In case of a fore....
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....ign company) *Designation *Director identification number of the director or Managing Director or manager or authorised representative; Form CRA-3 [Pursuant to rule 6(4) of the Companies (cost records and audit) rules, 2014] FORM OF THE COST AUDIT REPORT I/We,.. having been appointed as Cost Auditor(s) under Section ...(mention name (mention registered 148(3) of the Companies Act, 2013(18 of 2013) of. of the company) having its registered office at office address of the company) (hereinafter referred to as the company), have audited the Cost Records maintained under section 148 of the said Act, in compliance with the cost auditing standards, in respect of the.. ....(mention name (s) of good(s)/service(s) for the period/year.......……………….. (mention the financial year) maintained by the company and report, in addition to my/our observations and suggestions in para 2. Page 23 of 54 (i) (ii) (iii) (iv) (v) (vi) 2 I/We have/have not obtained all the information and explanations, which to the best of my/our knowledge and belief were necessary for the purpose of this audit. In my/our opinion, proper cost records, as per sec....
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....tion 148 of the Companies Act, 2013, have/have not been maintained by the company in respect of good(s)/service(s) under reference. In my/our opinion, proper returns adequate for the purpose of the Cost Audit have/have not been received from the branches not visited by me/us. In my/our opinion and to the best of my/our information, the said books and records give/do not give the information required by the Companies Act, 2013, in the manner so required. In my/our opinion, company has/does not have adequate system of internal audit of cost records which to my/our opinion is commensurate to its nature and size of its business. In my/our opinion, information, statements in the annexure to this cost audit report gives/does not give a true and fair view of the cost of production of good(s)/rendering of service(s), cost of sales, margin and other information relating to good(s)/service(s) under reference. Observations and suggestions, if any, of the Cost Auditor, relevant to the cost audit. Dated: this day of at 20 - (mention name of place of signing this report) SIGNATURE AND SEAL OF THE COST AUDITOR (S) MEMBERSHIP NUMBER (S) NOTES: (1) Delete words not applica....
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....ble. (2) If as a result of the examination of the books of account, the Cost Auditor desires to point out any material deficiency or give a qualified report, he/she shall indicate the same against the relevant para (i) to (vi) in the prescribed form of the Cost Audit Report giving details of discrepancies he/she has come across. (3) The report, suggestions, observations and conclusions given by the Cost Auditor under this paragraph shall be based on verified data, reference to which shall be made here and shall, wherever practicable, be included after the company has been afforded an opportunity to comment on them. Page 24 of 54 1. GENERAL INFORMATION: ANNEXURE TO THE COST AUDIT REPORT 1. CIN or GLN of the company: 2. Name of the company: 3. Registered office address: 4. Corporate office address: 5. E-mail address of the company: 6. Company's financial year to which the Cost Audit Report relates: 7. Name, address, membership number and e-mail of the Cost Auditor(s): 8. SRN Number and date of Filing of Form of intimation of appointment of cost auditor with the Central Government: 9. Date of first commencement of commercial production/delivery of service....
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.... of good(s)/service(s) under reference. 10. Date of Board of Directors' meeting wherein the Annexure to the cost audit report was approved: 11. No. of Audit Committee meetings held by the company, and attended by the Cost Auditor during the year. 12 If there is any foreign technical collaboration for the good(s)/service(s) under reference, the following details shall be given: (a) name and address of the foreign collaborators; (b) main terms of agreement; (c) amount of royalty, lump sum payment, technical aid fee payable and the basis of calculating the same; (d) whether the technical collaborator has contributed to the share capital. If so, the paid up share capital so held. 2. COST ACCOUNTING POLICY: (1) Briefly describe the cost accounting policy adopted by the Company and its adequacy or otherwise to determine correctly the cost of production/operation, cost of sales, sales realization and margin of the good(s)/service(s) under reference separately for each good(s)/service(s). The policy should cover, inter alia, the following areas: a) Identification of cost centres/cost objects and cost drivers. b) Accounting for material cost including packing materials, stores....
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.... and spares etc., employee cost, utilities 25 4. and other relevant cost components. c) Accounting, allocation and absorption of overheads d) Accounting for Depreciation/Amortization e) Accounting for by-products/joint-products or services, scarps, wastage etc. f) Basis for Inventory Valuation g) Methodology for valuation of Inter-Unit/Inter Company and Related Party transactions. h) Treatment of abnormal and non-recurring costs including classification of other non-cost items. i) Other relevant cost accounting policy adopted by the Company (2) Briefly specify the changes, if any, made in the cost accounting policy for the good(s)/service(s) under audit during the current financial year as compared to the previous financial year. (3) Observations of the Cost Auditor regarding adequacy or otherwise of the Budgetary Control System, if any, followed by the company. 3. PROCESS OF MANUFACTURE OF GOOD(S)/DELIVERY OF SERVICE(S): A brief note regarding the process of manufacture of good(s)/delivery of service(s) along with flow chart covering manufacture of good(s)/provision of service(s), utility and production/service department engaged in the manufacturing of the g....
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....ood(s)/delivery of service(s). GOOD(S)/SERVICE(S) DETAILS (FOR THE COMPANY AS A WHOLE): S. No. Name of each Good(s)/Service(s) A Production of Goods 1. 2. 3. etc. Net Sales (net of taxes, duties etc.) Covered under Cost Audit (Yes/No) 26 B Sub-Total (A) Services 1. 2. 3. etc. C. Sub-Total (B) Trading Activities D. 1. 2. 3. etc. Sub-Total (C) Other Income Total Income as per Audited Annual Report (A+B+C+D) 5. QUANTITATIVE INFORMATION FOR EACH GOOD(S)/SERVICE(S) SEPARATELY: Name of the Good(s)/Service(s) Financial Year Particulars 1. Available Capacity (a) Installed Capacity (b) Capacity enhanced during the year, if any (c) Capacity available through leasing arrangements, if any (d) capacity available through loan license/third party From Unit Current Year 27 to Previous Year (e) Total available capacity 2. Actual Production/Services rendered (a) Self Manufactured/rendered (b) Produced under leasing arrangements/outsourced (c) Produced on loan license/by third parties on job work/outsourcing agency (d) Total Production/Services rendered 3. Production/services rendered as per excise records/service tax records 4. Capacity utiliz....
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....ation (in-house) 5. Stock purchased for trading/Services hired (a) Domestic purchase/hiring of services (b) Imports (c) Total Purchases/Services hired 6. Stock and other adjustments (a) Change in stock of Finished Goods/Value of outgoing services (b) Self/Captive Consumption/internal services (incl. samples etc.) (c) Other quantitative adjustments, if any (wastage etc.) (d) Total adjustments 7. Total Available Quantity/Service rendered [2(d)+5(c) - 6(d)] 8. Actual Sales (a) Domestic Sales (Goods/Services) (b) Domestic Sales (Trading) (c) Export Sale (Goods/Services) (d) Export Sale (Trading) 28 (e) Total Quantity Sold/Services rendered Notes: 1. It should be mentioned whether the installed capacity is on single shift or multiple shift basis. 2. In order to have a meaningful comparison of production and installed capacity, wherever necessary these details should be expressed in appropriate units. 6. Details of the major input materials/service used for good(s) manufactured/service(s) rendered under reference. Particulars Unit Current Year Previous Year Quan Rate Amount Quan Rate Amount tity tity 1. Indigenous: (specify) (a) (b) (c) etc. 2. ....
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....Self-manufactured: (specify) (a) (b) (c) etc. 3. Imported: (specify) (a) (b) (c) etc. 4. Total Note: Details should be furnished in respect of major input material(s)/service(s) each constituting at least 5% of the total raw material cost. 6(A). STANDARD/ ACTUAL CONSUMPTION OF INPUT MATERIAL(S)/SERVICE(S) PER UNIT 29 Particulars (Specify) Unit 1. 2. 3. etc. Standard Current Year Actuals Previous Year Current Year Previous Year Note: Details should be furnished in respect of major input material(s)/service(s) each constituting at least 5% of the total raw material/input service cost. 6(B) BREAK-UP OF COST OF INPUT MATERIAL(S)/SERVICE(S) IMPORTED DURING THE YEAR: (A) Goods Particulars 1. F.O.B. Price (in foreign currency/INR) 2. Insurance & freight/Travelling expenses, if any 3. Customs duty, if any 4. Clearing charges, if any 5. Inland freight, if any 6. Other expenses 7. Total (B) Service(s) 1. (please specify) 2. --- 3. ---etc. 4. Total 30 Current Year Previous Year 7. UTILITIES: Particulars 1. Indigenous: (specify) (a) (b) (c) etc. 2. Self-Generated: (specify) (a) (b) (c) etc. 3. Imported: (specify) (a) (b) (c) etc. Total ....
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....For Company as a whole For the Company as a whole Share of good(s) produced /service(s) rendered Basis of apportionment of the (in case of more than one good(s) /service(s) additional columns may be added. good(s)/service(s) under reference Current Year Previous Year Quan tity Rate Amoun Quan Rate Amoun t tity t Quant Rate ity Amou nt 8. SALARIES AND WAGES - For the good(s)/Service(s) Covered: For Company as a whole 31 Particulars For the Company as a whole Share of good(s) produced /service(s) rendered (in case of more than one good(s)/service(s) additional columns may be added. Basis of apportionment of the good(s)/service(s) under reference A. Quantitative Details: 1. Direct Workers: a. Average number during the year b. Man days available Mandays actually worked for: (i) own production/provision of services (ii) job work/services outsourced d. Reason-wise analysis of idle man-days (a-b) 1) Absenteeism II) Shortage of raw materials/inp ut services III) Power shortage/failu res IV) Others (specify) 2. Indirect Workers: Current Year Previous Year Quan tity Rate Amoun Quan Rate Amoun t tity t Quant ....
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....ity Rate Amou nt 32 a. Average number during the year b. Man days available Mandays actually worked for: (i) own production/provision of services (ii) job work/services outsourced d. Reason-wise analysis of idle man-days (a-b) 1) Absenteeism 11) Shortage of raw materials/inp ut services III) Power shortage/failu res IV) Others (specify) B. Cost Detail: 1. Direct labour cost 2. Indirect employee costs 3. Employee costs on administration 4. Employee costs on selling and distribution 5. Other employees costs, if any (specify) 6. Total employee costs 7. a. Payments under any VRS scheme 33 the year 9. REPAIRS AND MAINTENANCE- Particulars 1. Land and Building 2. Plant and Machinery 3. Staff Quarters and colony 4.Others (specify) 5.Total Amount 6.Amount capitalized/deferred during the year 7.Net Amount (5-6) 8.Defered amount of earlier years, if any, 9.Total amount (7+8) For Company as a whole For the Company as a whole Share of good(s) produced /service(s) rendered Basis of apportionment of the good(s)/service(s) (in case of more than one good(s)/service(s) additional columns may be added. under reference Current Year ....
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.... Previous Year Quan tity Rate Amoun Quan Rate Amoun t tity t Quant Rate ity Amou nt 34 10. NET FIXED ASSETS AND DEPRECIATION: (For the Company as a whole) 1. Net Fixed Assets Particulars 2. Amount of depreciation provided in the financial records 3.Method of providing depreciation 4. Amount of depreciation absorbed in the cost records 5. Shortfall/Excess, if any Particulars Note: The impact of re-valuation of assets, if any, shall not be included. Current Year Previous Year 11. NET BLOCK, DEPRECIATION AND LEASE RENT: (For good(s)/service(s) covered) Net Assets at the end of the year Fixed Depreciation for the year Lease Rent Total paid, if any (b+c) Apportionment Goods/Services to Basis of Apportionment (c) (a) (b) Name of major cost centers for good(s) /service(s): (specify) (a) (b).. etc. Total Note: Excluding Net block of assets given on lease, if any. 12. OVERHEADS: 35 A B C D..etc. For Company as a whole Particulars For the Company as a whole Share of good(s) produced /service(s) rendered Factory Overheads (specify) a. b...etc. Administration (specify) Overheads a. b...etc. Selling Overheads (specify) a. ....
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.... b...etc. Distribution (specify) Overheads a. b...etc. Basis of apportionment of the good(s)/service(s) (in case of more than one good(s)/service(s) additional columns may be added. under reference Current Year Previous Year Quan Rate Amoun Quan Rate Amoun Quant Rate tity t tity t ity Amou nt Note: The break-up under each head should be furnished in respect of major items constituting at-least 90% of the overhead cost under each head. 13. RESEARCH AND DEVELOPMENT EXPENSES 36 Particulars 1. Process development and improvement 2. Existing product/service /service development 3. New product/service /service development 4. Others, if any 5. Total amount 6. Amount capitalized/ deferred during the year 7. Net amount (5-6) 8. Deferred amount of earlier years, if any 9. Total amount provided in the cost records (7+8 10. Amount paid to related parties of the Basis of apportionment Current Year(For Share the Company as a whole) Goods/Services covered 14. ROYALTY AND TECHNICAL KNOW HOW CHARGES: Particulars 1. Royalty on production/Sales/provision of services A B C..etc. For Company as a whole Share of the Basis of ap....
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....portionment Goods/Services covered Current Year A B C...etc. 37 2. Lump sum payment of royalty, if any 3. Technical knowhow charges 4. Others, if any 5. Total amount 6. Amount capitalized/ deferred during the year 7. Net amount (5-6) 8. Deferred amount of earlier years, if any 9. Amount provided in the financial accounts (7+8) 10. Amount absorbed in the cost records 11. Shortfall/ Excess, if any 12. Amount paid to related parties Note: The details should be furnished in respect of each agreement separately. 15. ABNORMAL/NON-RECURRING COST Particulars (Specify) Current Year 1. 2. 3...etc Total Previous Year 16. NON-MOVING STOCK (good-wise/service-wise details of non-moving stock may be provided): (A) Goods/Service (Specify) Particulars 38 Current Year Previous Year 1. 2. 3...etc. (B) Goods/Service (Specify) 1. 2. 3...etc. (C) Goods/Service (Specify) 1. 2. 3...etc. 17. WRITTEN OFF STOCK/FORFEITED SERVICES (good-wise/service-wise details may be provided): (A) Goods/Service (Specify) 1. 2. 3...etc. (B) Goods/Service (Specify) 1. 2. 3...etc. (C) Goods/Service (Specify) 1. Particulars 39 Current Year Previous Year 2. 3...etc. ....
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.... 18. INVENTORY VALUATION (at the end of the year): Particulars 1. Input material: (i) Purchased - Indigenous - Imported (ii)Self manufactured 2. Chemicals, additives and consumables 3. Stores and spares 4. Packing materials 5. Tools and implements and Jigs, Dies and Fixtures. 6. Work-in-progress: (i) material cost (ii) conversion cost (details to be given) 7. Finished goods: (i) unpacked (ii) packed 8. Scrap/wastage 9. Others, if any 10.Total value of inventory as per cost accounts Basis of valuation Current Year Previous year Quan Rate Amoun tity t Quan tity Rate Amount 40 11. Total value as per financial accounts 12. Reasons for major differences, if any Notes: (1)In respect of item at Sr. No. 1 and 6 details be furnished in respect of each major input material constituting at least 5% of the total material cost. (2) Give in brief the method of inventory valuation system indicating the elements of cost included therein and the extent thereof. (3) Capital work-in-progress to be shown separately. 19. Sales/Revenue of the good(s)/service(s) covered: Particulars Current Year Quantity Rate Amount (Rs.) Quantity Rate 1. Purchased Goo....
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....ds/Outsour ced services :(specify) (a) (b) 2. Loan License (a) (b) 3. Basis: (specify) Own Manufactured/ self-rendered: specify (a) (b) 4. Toda / Revenue 41 Previous Year Amount (Rs.) 20. Note: (i) Separate details shall be furnished for indigenous sales and export sales. Margin per Unit of Output/service rendered: Particulars 1.Purchased Goods/Outsourced services: Specify 2.Loan License Basis/third party services (Specify) 3.Own Manufactured/Self- rendered: (Specify) Current Year Sales/Revenue (Rs.) Cost of Sales Margin (Rs.) Sales/Revenue(Rs.) (Rs.) Previous Year Cost of Sales (Rs.) Margin (Rs.) Note: (i) Above details shall be furnished for good(s)/service(s) covered. (ii) Separate details shall be furnished for margin on indigenous sales and export sales. Whereas the good(s)/service(s) (such as sugar, bulk drugs, formulations etc.) is sold at different prices in accordance with government policy, sales realization and margin on such good(s)/service(s) at different prices shall be shown along with quantity and value. 21. Related Party Transaction: Sl. Name & NO Address of Good(s)/ Quantity service(s Transfer Price Nature ....
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....of Transaction (sale, purchase etc.) Amount Normal Price Basis adopted to determine the Related Party the Normal Price 42 Note: 1. Details should be furnished for each sale/purchase separately. 22. Central Excise/Service Tax Reconciliation for the Good(s)/service(s) under reference: Good(s)/Service(s) S. Particulars No. A. Quantitative Details: 1 Opening Stock 2 Add: Production/services 3 Less: Closing Stock 4 Total Sales/Clearances S. Particulars No. B. Details of Clearances: 1 Total Clearances 2 Less: Duty Free Clearances 3 Excisable/Service taxable Clearances 4 Penalty/Fine/Interest payable, if any 5 Total Duty Payable (total 3 & 4) S. Particulars No. C. Summary of CENVAT Credit 1 Opening Balance 2 Add: Availed during the year 3 Add: Refunds received during the year Unit A B C Assessable Value Rate of Duty Amount of Duty (Rs.) (Rs.) 43 Inputs Capital Goods Total 4 Less: Closing Balance as per Excise/Service Tax Records 5 Total CENVAT Credit utilized during the year (1+2+3+4) 6 Closing Balance as per Annual Accounts 7 Difference between 4-6 8 (State amount and reasons for difference) S. No. Particulars....
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.... D. Reconciliation of Duty Paid 1 Excise Duty Payable as per 'B' 2 Total Excise Duty paid through: (a) CENVAT Account- (Input goods/services) (b) CENVAT Account- (Capital Goods) (c) P.L.A. Total (a+b+c) 3 Difference between (1-2) 4 (State amount and reasons for difference) 5 Excise Duty as per RT - 12 6 Difference between (2-5) 7 Amount and reasons for difference E. Reconciliation of Duty Paid & Recovered: 1 Excise Duty paid as per P and L A/C 2 Excise Duty recovered as per P and L A/c 3 Difference between duty paid and recovered 4 Amount and reasons for difference F. Reconciliation of Turnover 1 Turnover as per excise/ST records 2 Turnover as per Annual Accounts (Net off Duties & Taxes) Amount (Rs.) - 44 3 Difference between (1-2) 4 Amount and reasons for difference 23. Profit Reconciliation: S. Particulars No. 1 Profit or Loss as per Cost accounting records 2 Add: incomes not considered in cost accounts: Specify 3 4 5 Less: expenses not considered in cost accounts: Specify Add: overvaluation of closing stock in financial accounts Add: under-valuation of opening stock in financial accounts 6 Less: under-valuation o....
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....f closing stock in financial 7 accounts Less: overvaluation of opening stock in financial accounts 8 Adjustments for others, if any (specify) 9 Profit or Loss as per financial accounts Previous year Current year 24. Cost Statement: (for each good(s)/service(s) separately) 5. Particulars Quantity Rate per Amount Cost per Unit 45 No. 1 Material consumed: 2 1.Purchased: (a): Indigenous (specify) (b): Imported (specify) 2. Self-Manufactured/Rendered (specify) Process Chemicals (specify) 3 Utilities: 1.Purchased: (a) Indigenous (specify) (b) Imported (specify) 2. Self-Manufactured (specify) 4 Direct Wages and Salaries 5 Consumable Stores & Spares 6 Depreciation 7 Outsourced Servcie Cost 8 Intermediate Service Cost 9 Lease Rent, if any 10 Repairs and Maintenance: (a) Building (b) Plant & Machinery (c) Others, if any 11 Other works overheads Unit Unit (Rs.) (Rs.) Current Year Previous Year (Rs.) (Rs.) 46 12 Total Works Overheads 13 Overheads related to service cost 14 Overheads related to outsourced service cost 15 Royalty, if any 16 Technical assistance/know-how fee 17 Research and Development 18 Quality Control ....
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....19 Administrative overheads 20 20 21 (relating to production/service activities) (a) Salaries and Wages (b) Others (specify) (c) Total (a+b) Total Adjustment for variances (where standard costing system is followed) 22 Add: Opening Stock 23 Less: Closing Stock (Work-in-progress) Less: Credits (from wastage and by- products/services)/recoveries, if any 24 Packing cost Primary (a) Material (b) Others (c) Total 25 Cost of Production/service 26 Finished Goods purchased, if any 47 27 Opening Stock Closing Stock (finished goods/services) 28 Total 29 30 31 32 33 34 35 Quantity and cost transferred for: (i) Captive consumption, if (ii) Sales any (iii) Others, if any Packing cost Secondary (a) Material (b) Others (c) Total Other expense: Administrative overheads (a) (others) (b) Others (specify) Selling & Distribution Expenses: (a) Salaries & Wages (b) Freight & Transport charges (c) Commission (d) Advertisement expenses (e) Royalty on sales, if any (f) (g) Warranty expenses Total (a to f) Interest & Finance Charges: (a) For manufacturing activity (b) Others (c) Total (a to b) Total Cost of Sales (excluding ....
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....excise duty/service tax) of packed quantity sold Sales realization Less: Excise duty & others statutory levies 36 Net Sales Realization 37 Margin 48 38 Add: export benefits and incentives, if any 39 40 40 41 42 Total margin (including export benefits) Ex-factory price (excluding sales tax) Maximum retail price (excluding sales tax etc.) Maximum retail price, if any, prescribed by the Government/statutory body etc. Note: 1. Separate proforma shall be prepared for each type/variety/ description of good(s)/service(s) under reference. 2. Separate proforma shall be prepared for the quantity used for captive consumption, quantity sold within the country and the quantity exported. Expenses incurred on export and the incentive earned thereon shall be indicated in the proforma applicable for the quantity produced and exported. 3. Separate proforma shall be prepared for any related party/inter-unit transfer of intermediate/finished good(s)/service(s) under reference. 4.. The proforma may be suitably modified to cover the special features, if any, of the good(s)/service(s) covered. 5.. Indicate whether the prices of the good(s)/service(s) covered are ex-factory....
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.... prices, F.O.R prices, door delivery prices or any other terms. In case of ex-factory prices, whether cost of dispatch packing materials, freight, insurance and delivery charges are recoverable from the customers separately. 49 FORM No.CRA-4 Form for filing Cost Audit Report with the Central Government [Pursuant to Rule 6(6) of the Companies (cost records and audit) rules, 2014] PART I - GENERAL INFORMATION Note: All fields marked in * are to be 1* (a) Corporate identity number (CIN) company registration number of company (b) Global location number (GLN) of company 2 (a) *Name of the company mandatorily filled. Pre-Fill or foreign the (b) *Address of the registered office or of the principal place of business in India of the company Fro (DD/MM/YYY (c) *E-mail address of the company T (DD/MM/YYY 3 (a) *Financial year (DD/MM/YYY (b) *Date of Board of Directors meeting in which Annexure to the cost audit report was approved 4 (a) *State number of good(s)/service(s) for which the Cost Audit Report is being submitted (b) *Details of such good(s)/service(s) of the company (Number of rows depending on 4(a) above) Good(s)/service(s) Covered 5 (a) *State nu....
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....mber of good(s)/service(s) not covered in the Cost Audit Report 50 (b) *Details of such good(s)/service(s) of the company (Number of rows depending on 5(a) above) Good(s)/service(s) 6 Details of the cost auditor (a) *Category of the cost auditor O LLP Individual Cost accountant's firm (b) *Name of the cost auditor or the cost auditor's firm appointed as cost auditor of the company (c) *Membership number of cost auditor or cost auditor's firm's registration number (d) Address of the cost auditor or cost auditor's firm (i) Line I Line II (ii) City (iii) State (iv) Country (v) Pin Code (f) *E-mail ID of the cost auditor or cost auditor's firm 7 (a) *Whether the cost auditor's report has been qualified Yes No If yes, please state (b) *Whether the cost auditor's report has any reservations 51 О Yes No If yes, please state (c) *Whether the cost auditor's report has any adverse remarks No If yes, please state 8 (a) *Whether the cost auditor's report contain any observations or suggestions No Yes (b) *If yes, cost auditor's observations/suggestions Attachements: 1 Cost audit report 2 Optional attachment(s) - if any Verification: PART-II ....
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....Yes Attach Attach List of attachments Remove attachment To the best of my knowledge and belief, the information given in this form and its attachments is correct and complete. 52 I have been authorised by the Board of Directors' dated DD/MM/YYYY) number to sign and submit this form. I am authorised to sign and submit this form. To be digitally signed by: Managing Director or Director or Manager or Secretary (in case of an Indian company) Digital resolution or an authorised representative (in case of a foreign company) *Designation Signatures *Director identification number of the Director or Managing Director; or the manager or of authorised representative; or Membership number, if applicable of the secretary Director of the company Director identification number of the director Modify CheckForm 53 Prescrutiny Submit Digital Signatures Document 2 FORM CRA-1 (Pursuant to rule 5(1) of the Companies (Cost Records and Audit) Rules, 2014) Particulars relating to the Items of Costs to be included in the Books of Accounts 1. Material Costs.- (a) Proper records shall be maintained showing separately all receipts, issues and balances both in quantities and c....
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....ost of each item of raw material required for the production of goods or rendering of services under reference. (b) The material receipt shall be valued at purchase price including duties and taxes, freight inwards, insurance, and other expenditure directly attributable to procurement (net of trade discounts, rebates, taxes and duties refundable or to be credited by the taxing authorities) that can be quantified with reasonable accuracy at the time of acquisition. (c) Finance costs incurred in connection with the acquisition of materials shall not form part of material cost. (d) Self-manufactured materials or captive consumption shall be valued including direct material cost, direct employee cost, direct expenses, factory overheads, share of administrative overheads relating to production but excluding share of other administrative overheads, finance cost and marketing overheads. (e) Spares which are specific to an item of equipment shall not be taken to inventory, but shall be capitalized with the cost of the specific equipment. Cost of capital spares or insurance spares, whether procured with the equipment or subsequently, shall be amortised over a period, not exc....
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....eeding the useful life of the equipment. (f) Normal loss or spoilage of material prior to reaching the factory or at places where the services are provided shall be absorbed in the cost of balance materials net of amounts recoverable from suppliers, insurers, carriers or recoveries from disposal. (g) Losses due to shrinkage or evaporation and gain due to elongation or absorption of moisture etc., before the material is received shall be absorbed in material cost to the extent they are normal, with corresponding adjustment in the quantity. (h) The forex component of imported material cost shall be converted at the rate on the date of the transaction. Any subsequent change in the exchange rate till payment or otherwise shall not form part of the material cost. (i) Any demurrage or detention charges, or penalty levied by transport or other authorities shall not form part of the cost of materials. (i) Subsidy or Grant or Incentive and any such payment received or receivable with respect to any material shall be reduced from cost for ascertainment of the cost of the cost object to which such amounts are related. (k) Issues shall be valued using appropriate assumptions on ....
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....cost flow, e.g. First-in-First-out, Last-in- First-out, Weighted Average Rate. The method of valuation shall be followed on a consistent basis. (1) Where materials are accounted at standard cost, the price variances related to materials shall be treated as part of material cost. 7 (m) Any abnormal cost shall be excluded from the material cost. (n) Wherever, material costs include transportation costs, determination of costs of transportation shall be governed by Para No. 9 on Determination of Cost of Transportation. (0) Self-manufactured components and sub-assemblies or captive consumption shall be valued including direct material cost, direct employee cost, direct expenses, factory overheads, share of administrative overheads relating to production but excluding share of other administrative overheads, finance cost and marketing overheads. (p) The material cost of normal scrap or defectives which are rejects shall be included in the material cost of goods manufactured. The material cost of actual scrap or defectives, not exceeding the normal shall be adjusted in the material cost of good production. Material Cost of abnormal scrap or defectives shall not be included....
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.... in material cost but treated as loss after giving credit to the realisable value of such scrap or defectives. (q) Material costs shall be directly traced to a Cost object to the extent it is economically feasible or shall be assigned to the cost object on the basis of material quantity consumed or similar identifiable measure and valued as per above principles. (r) Where the material costs are not directly traceable to the cost object, the same shall be assigned on a suitable basis like technical estimates. (s) Where a material is processed or part manufactured by a third party according to specifications provided by the buyer, the processing or manufacturing charges payable to the third party shall be treated as part of the material cost. (t) Wherever part of the manufacturing operations or activity is subcontracted, the subcontract charges related to materials shall be treated as direct expenses and assigned directly to the cost object. (u) The cost of indirect materials shall be assigned to the various Cost objects based on a suitable basis such as actual usage or technical norms or a similar identifiable measure. (v) The cost of materials like catalysts, dies, to....
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....ols, moulds, patterns etc, which are relatable to production over a period of time shall be amortized over the production units benefited by such cost. (w) The cost of indirect material with life exceeding one year shall be included in cost over the useful life of the material. 2. Employee Cost.- (a) Proper records shall be maintained in respect of employee costs in such a manner as to enable the company to book these expenses cost centre wise or department wise with reference to goods or services under reference and to furnish necessary particulars. Where the employees work in such a manner that it is not possible to identify them with any specific cost centre or service centre or department, the employees cost shall be apportioned to the cost centre or service centres or departments on equitable and reasonable basis and applied consistently. (b) Employee cost shall be ascertained taking into account the gross pay including all allowances payable along with the cost to the employer of all the benefits. 8 (c) Bonus whether payable as a statutory minimum or on a sharing of surplus shall be treated as part of employee cost. Ex gratia payable in lieu of or in addition t....
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....o bonus shall also be treated as part of the employee cost. (d) Remuneration payable to Managerial Personnel including Executive Directors on the Board and other officers of a corporate body under a statute shall be considered as part of the employee cust of the year under reference whether the whole or part of the remuneration is computed as a percentage of profits. Remuneration paid to non executive directors shall not form part of employee cost but shall form part of administrative overheads. (e) Separation costs related to voluntary retirement, retrenchment, termination and other related matters shall be amortised over the period benefitting from such costs. (f) Employee cost shall not include imputed costs. (g) Cost of Idle time is ascertained by the idle hours multiplied by the hourly rate applicable to the idle employee or a group of employees. (h) Where employee cost is accounted at standard cost, variances due to normal reasons related to employee cost shall be treated as part of employee cost. Variances due to abnormal reasons shall be treated as part of abnormal cost. (i) Any subsidy, grant, incentive or any such payment received or receivable with respect....
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.... to any employee cost shall be reduced for ascertainment of cost of the cost object to which such amounts are related. (j) Any abnormal cost where it is material and quantifiable shall not form part of the employee cost. (k) Penalties, damages paid to statutory authorities or other third parties shall not form part of the employee cost. (1) The cost of free housing, free conveyance and any other similar benefits provided to an employee shall be determined at the total cost of all resources consumed in providing such benefits. (m) Any recovery from the employee towards any benefit provided, namely, housing shall be reduced from the employee cost. (n) Any change in the cost accounting principles applied for the determination of the employee cost shall be made only if it is required by law or a change would result in a more appropriate preparation or presentation of cost statements of an enterprise. (o) Where the employee services are traceable to a cost object, such employees' cost shall be assigned to the cost object on the basis such as time consumed or number of employees engaged or other related basis or similar identifiable measure. (p) While determining whether ....
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....a particular employee cost is chargeable to a separate cost object, the principle of materiality shall be adhered to. (q) Where the employee costs are not directly traceable to the cost object, the same shall be assigned on suitable basis like estimates of time based on time study. (r) The amortised separation costs related to voluntary retirement, retrenchment, and termination or other related matters for the period shall be treated as indirect cost and assigned to the cost objects in an appropriate manner provided that unamortised amount related to discontinue operations, shall not be treated as employee cost. (s) Recruitment costs, training cost and other such costs shall be treated as overheads and dealt with accordingly. (t) Overtime premium shall be assigned directly to the cost object or treated as overheads depending on the economic feasibility and the specific circumstance requiring such overtime. (u) idle time cost shall be assigned direct to the cost object or treated as overheads depending on the economic feasibility and the specific circumstances causing such idle time. 3. Utilities.- (a) Proper records shall be maintained showing the quantity and cost of....
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.... each major utility such as power, water, steam, effluent treatment and other related utilities produced and consumed by the different cost centres in such detail as to have particulars for each utility separately. (b) Each type of utility shall be treated as a distinct cost object. (c) Cost of utilities purchased shall be measured at cost of purchase including duties and taxes, transportation cost, insurance and other expenditure directly attributable to procurement (net of trade discounts, rebates, taxes and duties refundable or to be credited) that can be quantified with reasonable accuracy at the time of acquisition. (d) Cost of self-generated utilities for own consumption shall comprise direct material cost, direct employee cost, direct expenses and factory overheads. (e) In case of utilities generated for the purpose of inter unit transfers, the distribution cost incurred for such transfers shall be added to the cost of utilities determined as above. (f) Cost of utilities generated for the intercompany transfers shall comprise direct material cost, direct employee cost, direct expenses, factory overheads, distribution cost and share of administrative overheads. ....
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.... (g) Cost of utilities generated for the sale to outside parties shall comprise direct material cost, direct employee cost, direct expenses, factory overheads, distribution cost, share of administrative overheads and marketing overheads. The sale value of such utilities shall also include the margin. (h) Finance costs incurred in connection with the utilities shall not form part of cost of utilities. (i) The cost of utilities shall include the cost of distribution of such utilities. The cost of distribution shall consist of the cost of delivery of utilities up to the point of consumption. (j) Cost of utilities shall not include imputed costs. (k) Where cost of utilities is accounted at standard cost, the price variances related to utilities shall be treated as part of cost of utilities and the portion of usage variances due to normal reasons shall be treated as part of cost of utilities. Usage variances due to abnormal reasons shall be treated as part of abnormal cost. (1) Any subsidy or grant or incentive or any such payment received or receivable with respect to any cost of utilities shall be reduced for ascertainment of the cost to which such amounts are related. (m....
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....) The cost of production and distribution of utilities shall be determined based on the normal capacity or actual capacity utilization whichever is higher and unabsorbed cost, if any, shall be treated as 10 abnormal cost. Cost of a Stand-by Utility shall include the committed costs of maintaining such a utility. (n) Any abnormal cost where it is material and quantifiable shall not form part of the cost of utilities. (o) Penalties, damages paid to statutory authorities or other third parties shall not form part of the cost of utilities. (p) Credits or recoveries relating to the utilities including cost of utilities provided to outside parties, material and quantifiable, shall be deducted from the total cost of utility to arrive at the net cost of utility. (q) Any change in the cost accounting principles applied for the measurement of the cost of utilities shall be made only if, it is required by law or a change would result in a more appropriate preparation or presentation of cost statements of an organisation. (r) While assigning cost of utilities, traceability to a cost object in an economically feasible manner shall be the guiding principle. (s) Where the cost of ....
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....utilities is not directly traceable to cost object, it shall be assigned on the most appropriate basis. (t) The most appropriate basis of distribution of cost of a utility to the departments consuming services is to be derived from usage parameters. 4. Direct Expenses: (a) Proper records shall be maintained in respect of direct expenses in such a manner as to enable the company to book these expenses cost centre wise or cost object or department wise with reference to goods or services under reference and to furnish necessary particulars. (b) Direct expenses incurred for the use of bought out resources shall be determined at invoice or agreed price including duties and taxes, and other expenditure directly attributable thereto net of trade discounts, rebates, taxes and duties refundable or to be credited. (c) Other direct expenses shall be determined on the basis of amount incurred in connection therewith. ( d) Direct expenses paid or incurred in lump-sum or which are in the nature of 'one-time' payment, shall be amortised on the basis of the estimated output or benefit to be derived from such direct expenses. (e) If an item of direct expenses does not meet the ....
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....test of materiality, it can be treated as part of overheads. (f) Finance costs incurred in connection with the self-generated or procured resources shall not form part of direct expenses. Direct expenses shall not include imputed costs. (g) Where direct expenses are accounted at standard cost, variances due to normal reasons shall be treated as part of the direct expenses. Variances due to abnormal reasons shall not form part of the direct expenses . (h) Any subsidy or grant or incentive or any such payment received or receivable with respect to any direct expenses shall be reduced for ascertainment of the cost of the cost object to which such amounts are related. (i) Any abnormal portion of the direct expenses where it is material and quantifiable shall not form part of the direct expenses. (j) Penalties, damages paid to statutory authorities or other third parties shall not form part of the direct expenses . 11 (k) Credits or recoveries relating to the direct expenses, material and quantifiable, shall be deducted to arrive at the net direct expenses. (1) Any change in the cost accounting principles applied for the measurement of the direct expenses shall b....
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....e made only if, it is required by law or a change would result in a more appropriate preparation or presentation of cost statements of an organisation. (m) Direct expenses that are directly traceable to the cost object shall be assigned to that cost object. 5. Repairs and Maintenance.- (a) Proper records showing the expenditure incurred by the workshop, tool room and on repairs and maintenance in the various cost centres or departments shall be maintained under different heads. (b) Repairs and maintenance cost shall be the aggregate of direct and indirect cost relating to repairs and maintenance activity. Direct cost shall include the cost of materials, consumable stores, spares, manpower, equipment usage, utilities and other identifiable resources consumed in such activity. Indirect cost shall include the cost of resources common to various repairs and maintenance activities such as manpower, equipment usage and other costs allocable to such activities. (c) Cost of in-house repairs and maintenance activity shall include cost of materials, consumable stores, spares, manpower, equipment usage, utilities, and other resources used in such activity. (d) Cost of repairs and....
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.... maintenance activity carried out by outside contractors inside the entity shall include charges payable to the contractor and cost of materials, consumable stores, spares, manpower, equipment usage, utilities, and other costs incurred by the entity for such jobs. (e) Cost of repairs and maintenance jobs carried out by contractor at its premises shall be determined at invoice or agreed price including duties and taxes, and other expenditure directly attributable thereto net of discounts (other than cash discount), taxes and duties refundable or to be credited. This cost shall also include the cost of other resources provided to the contractors. (f) Cost of repairs and maintenance jobs carried out by outside contractors shall include charges made by the contractor and cost of own materials, consumable stores, spares, manpower, equipment usage, utilities and other costs used in such jobs. (g) Each type of repairs and maintenance shall be treated as a distinct activity, if material and identifiable. (h) Cost of repairs and maintenance activity shall be measured for each major asset category separately. (i) Cost of spares replaced which do not enhance the future economic ....
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....benefits from the existing asset beyond its previously assessed standard of performance shall be included under repairs and maintenance cost. (j) High value spare, when replaced by a new spare and is reconditioned, which is expected to result in future economic benefits, the same shall be taken into stock. Such a spare shall be valued at an amount that measures its service potential in relation to a new spare which amount shall not exceed the cost of reconditioning the spare. The difference between the total of the cost of the new spare and the reconditioning cost and the value of the reconditioned spare shall be treated as repairs and maintenance cost. 12 (k) The cost of major overhaul shall be amortised on a rational basis. (1) Finance costs incurred in connection with the repairs and maintenance activities shall not form part of Repairs and maintenance costs. (m) Repairs and maintenance costs shall not include imputed costs. (n) Price variances related to repairs and maintenance, where standard costs are in use, shall be treated as part of repairs and maintenance cost. The portion of usage variances attributable to normal reasons shall be treated as part of repai....
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....rs and maintenance cost. Usage variances attributable to abnormal reasons shall be excluded from repairs and maintenance cost. (o) Subsidy or Grant or Incentive or amount of similar nature received or receivable with respect to repairs and maintenance activity, if any, shall be reduced for ascertainment of the cost of the cost object to which such amounts are related. (p) Any repairs and maintenance cost resulting from some abnormal circumstances, namely, major fire, explosion, flood and similar events, if material and quantifiable, shall not form part of the repairs and maintenance cost. (q) Fines, penalties, damages and similar levies paid to statutory authorities or other third parties shall not form part of the repairs and maintenance cost. (r) Credits or recoveries relating to the repairs and maintenance activity, material and quantifiable, shall be deducted to arrive at the net repairs and maintenance cost. (s) Any change in the cost accounting principles applied for the measurement of the repairs and maintenance cost shall be made only if, it is required by law or a change would result in a more appropriate preparation or presentation of cost statements of an o....
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....rganisation. (t) Repairs and maintenance costs shall be traced to a cost object to the extent economically feasible. (u) Where the repairs and maintenance cost is not directly traceable to cost object, it shall be assigned based on either of the following the principles of (1) Cause and Effect - Cause is the process or operation or activity and effect is the incurrence of cost and (2) Benefits received - overheads are to be apportioned to the various cost objects in proportion to the benefits received by them. (v) If the repairs and maintenance cost (including the share of the cost of reciprocal exchange of services) is shared by several cost objects, the related cost shall be measured as an aggregate and distributed among the cost objects. 6. Fixed Assets and depreciation.- (a) Proper and adequate records shall be maintained for assets used for production of goods or rendering of services under reference in respect of which depreciation has to be provided for. These records shall, inter-alia, indicate grouping of assets under each good or service, the cost of acquisition of each item of asset including installation charges, date of acquisition and rate of depreciation....
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..... (b) Depreciation and amortisation shall be measured based on the depreciable amount and the useful life. The residual value of an intangible asset shall be assumed to be zero unless: (i) there is a commitment by a third party to purchase the asset at the end of its useful life; or (ii) there is an active market for the asset and: 13 a. residual value can be determined by reference to that market; and b.it is probable that such a market will exist at the end of the asset's useful life. c. The residual value of a fixed asset shall be considered as zero if the entity is unable to estimate the same with reasonable accuracy. (c) The minimum amount of depreciation to be provided shall not be less than the amount calculated as per principles and methods as prescribed by any law or regulations applicable to the entity and followed by it. (d) In case of regulated industry the amount of depreciation shall be the same as prescribed by the concerned regulator. (e) While estimating the useful life of a depreciable asset, consideration shall be given to the following factors: (i) Expected physical wear and tear; (ii) Obsolescence; and (iii) Legal or other limits on the use o....
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....f the asset. (f) The useful life of an intangible asset that arises from contractual or other legal rights shall not exceed the period of the contractual or other legal rights, but may be shorter depending on the period over which the entity expects to use the asset. (g) If the contractual or other legal rights are conveyed for a limited term that can be renewed, the useful life of the intangible asset shall include the renewal period(s) only if there is evidence to support renewal by the entity without significant cost. The useful life of a re-acquired right recognised as an intangible asset in a business combination is the remaining contractual period of the contract in which the right was granted and shall not include renewal periods. (h) The useful life of an intangible asset, in any situation, shall not exceed 10 years from the date it is available for use. (i) Depreciation shall be considered from the time when a depreciable asset is first put into use. An asset which is used only when the need arises but is always held ready for use. Example: fire extinguisher, stand by generator, safety equipment shall be considered to be an asset in use. Depreciable assets sh....
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....all be considered to be put into use when commercial production of goods and services commences. (J) Depreciation on an asset which is temporarily retired from production of goods and services shall be considered as abnormal cost for the period when the asset is not in use. (k) Depreciation of any addition or extension to an existing depreciable asset which becomes an integral part of that asset shall be based on the remaining useful life of that asset. (I) Depreciation of any addition or extension to an existing depreciable asset which retains a separate identity and is capable of being used after the expiry of the useful life of that asset shall be based on the estimated useful life of that addition or extension. (m) The impact of higher depreciation due to revaluation of assets shall not be assigned to cost object. 14 (n) Impairment loss on assets shall be excluded from cost of production. (o) The method of depreciation used shall reflect the pattern in which the asset's future economic benefits are expected to be consumed by the entity. (p) An entity can use any of the methods of depreciation to assign depreciable amount of an asset on a systematic basis over its....
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.... useful life, namely, Straight-line method; Diminishing balance method; and Units of production method, etc. (q) The method of amortisation of intangible asset shall reflect the pattern in which the economic benefits accrue to entity. (r) The methods and rates of depreciation applied shall be reviewed at least annually and, if there has been a change in the expected pattern of consumption or loss of future economic benefits, the method applied shall be changed to reflect the changed pattern. (s) Spares purchased specifically for a particular asset, or class of assets, and which would become redundant if that asset or class of asset was retired or use of that asset was discontinued, shall form part of that asset. The depreciable amount of such spares shall be allocated over the useful life of the asset. (t) Cost of small assets shall be written off in the period in which they were purchased as per the accounting policy of the entity. (u) Depreciation of an asset shall not be considered in case cumulative depreciation exceeds the original cost of the asset, net of residual value. (v) Where depreciation for an addition of an asset is measured on the basis of the number ....
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....of days for which the asset was used for the preparation and presentation of financial statements, depreciation of the asset for assigning to cost of object shall be measured in relation to the period, the asset actually utilized. (w) Depreciation shall be traced to the cost object to the extent economically feasible. (x) Where the depreciation is not directly traceable to cost object, it shall be assigned based on either of the following two principles; namely:- (i) Cause and Effect - Cause is the process or operation or activity and effect is the incurrence of cost and (ii) Benefits received - overheads are to be apportioned to the various cost objects in proportion to the benefits received by them. 7. Overheads. (a) Proper records shall be maintained for various items of indirect expenses comprising overheads pertaining to goods or services under reference. These expenses shall be analysed, classified and grouped according to functions. (b) Overheads representing procurement of resources shall be determined at invoice or agreed price including duties and taxes, and other expenditure directly attributable thereto net of discounts (other than cash discounts), taxes....
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.... and duties refundable or to be credited. (c) Overheads other than those referred to above shall be determined on the basis of cost incurred in connection therewith. 15 (d) Any abnormal cost where it is material and quantifiable shall not form part of the overheads. (e) Finance costs incurred in connection with procured or self-generated resources shall not form part of overheads. (f) Overheads shall not include imputed cost. (g) Overhead variances attributable to normal reasons shall be treated as part of overheads. Overhead variances attributable to abnormal reasons shall be excluded from overheads. (h) Any subsidy or grant or incentive or amount of similar nature received or receivable with respect to overheads shall be reduced for ascertainment of the cost of the cost object to which such amounts are related. (i) Fines, penalties, damages and similar levies paid to statutory authorities or other third parties shall not form part of the overheads. (j) Credits or recoveries relating to the overheads, material and quantifiable, shall be deducted from the total overhead to arrive at the net overheads. Where the recovery exceeds the total overheads, the balance reco....
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....very shall be treated as other income. (k) Any change in the cost accounting principles applied for the measurement of the overheads shall be made only if, it is required by law or a change would result in a more appropriate preparation or presentation of cost statements of an entity. (I) While assigning overheads, traceability to a cost object in an economically feasible manner shall be the guiding principle. The cost which can be traced directly to a cost object shall be directly assigned. (m) Overheads shall be classified according to functions, viz., works, administration, selling and distribution, head office, corporate etc. (n) Assignment of overheads to the cost objects shall be based on either of the following two principles; (1) Cause and Effect - Cause is the process or operation or activity and effect is the incurrence of cost and (2) Benefits received - overheads are to be apportioned to the various cost objects in proportion to the benefits received by them. (o) The variable production overheads shall be absorbed to products or services based on actual capacity utilisation. (p) The fixed production overheads shall be absorbed based on the normal capacity....
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..... (q) Assignment of Administration Overheads shall be in accordance with para No. 8. (r) Marketing overheads that can be identified to a product or service shall be assigned to that product or service. (s) Marketing overheads that cannot be identified to a product or service shall be assigned to the products or services on the most appropriate basis. 8. Administrative Overheads.- (a) Administrative overheads shall be the aggregate of cost of resources consumed in activities relating to general management and administration of an organisation. 16 (b) In case of leased assets, if the lease is an operating lease, the entire rentals shall be included in the administrative overheads. If the lease is a financial lease, the finance cost portion shall be segregated and treated as part of finance costs. (c) The cost of software (developed in house, purchased, licensed or customised), including up- gradation cost shall be amortised over its estimated useful life. (d) The cost of administrative services procured from outside shall be determined at invoice or agreed price including duties and taxes, and other expenditure directly attributable thereto net of discounts (other tha....
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....n cash discount), taxes and duties refundable or to be credited. (e) Any subsidy or grant or incentive or any amount of similar nature received or receivable with respect to any Administrative overheads shall be reduced for ascertainment of the cost of the cost object to which such amounts are related. (f) Administrative overheads shall not include any abnormal administrative cost. (g) Fines, penalties, damages and similar levies paid to statutory authorities or other third parties shall not form part of the administrative overheads. (h) Credits or recoveries relating to the administrative overheads including those rendered without any consideration, material and quantifiable, shall be deducted to arrive at the net administrative overheads. (i) Any change in the cost accounting principles applied for the measurement of the administrative overheads shall be made only if it is required by law or a change would result in a more appropriate preparation or presentation of cost statements of an organisation. (j) While assigning administrative overheads, traceability to a cost object in an economically feasible manner shall be the guiding principle. (k) Assignment of admini....
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....strative overheads to the cost objects shall be based on either of the following two principles; namely:- (i) Cause and Effect - Cause is the process or operation or activity and effect is the incurrence of cost. (ii) Benefits received - overheads are to be apportioned to the various cost objects in proportion to the benefits received by them. 9. Transportation Cost.- (a) Proper records shall be maintained for recording the actual cost of transportation showing each element of cost such as freight, cartage, transit insurance and others after adjustment for recovery of transportation cost. Abnormal costs relating to transportation, if any, are to be identified and recorded for exclusion of computation of average transportation cost. (b) In case of a manufacturer having his own transport fleet, proper records shall be maintained to determine the actual operating cost of vehicles showing details of various elements of cost, such as salaries and wages of driver, cleaners and others, cost of fuel, lubricant grease, amortized cost of tyres and battery, repairs and maintenance, depreciation of the vehicles, distance covered and trips made, goods hauled and transported to the....
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.... depot. (c) In case of hired transport charges incurred for despatch of goods, complete details shall be recorded as to date of despatch, type of transport used, description of the goods, destination of buyer, name of consignee, challan number, quantity of goods in terms of weight or volume, distance involved, amount paid and other related details. (d) Records shall be maintained separately for inward and outward transportation cost specifying the details particulars of goods despatched, name of supplier or recipient, amount of freight etc. 17 (e) Separate records shall be maintained for identification of transportation cost towards inward movement of material (procurement) and transportation cost of outward movement of goods removed or sold for both home consumption and export. (f) Records for transportation cost from factory to depot and thereafter shall be maintained separately. (g) Records for transportation cost for carrying any material or product to job-workers place and back shall be maintained separately so as include the same in the transaction value of the product. (h) Records for transportation cost for goods involved exclusively for trading activities sha....
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....ll be maintained separately and the same shall not be included for claiming any deduction for calculating assessable value excisable goods cleared for home consumption. (i) Records of transportation cost directly allocable to a particular category of products shall be maintained separately so that allocation can be made. (j) For common transportation cost, both for own fleet or hired ones, proper records for basis of apportionment shall be maintained. (k) Records for transportation cost for exempted goods, excisable goods cleared for export shall be maintained separately. (1) Separate records of cost for mode of transportation other than road like ship or air are to be maintained, which shall be included in total cost of transportation. (m) Inward transportation costs shall form the part of the cost of procurement of materials which shall be identified for proper allocation or apportionment to the materials or products. (n) Outward transportation cost shall form the part of the cost of sale and shall be allocated or apportioned to the materials and goods on a suitable basis. (o) The following basis shall be used, in order of priority, for apportionment of outward tra....
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....nsportation cost depending upon the nature of products, unit of measurement followed and type of transport used, namely:- (i) Weight; (ii) Volume of goods; (iii) Tonne-Km; (iv) Unit or Equivalent unit; (v) Value of goods; (vi) Percentage of usage of space. (p) Once a basis of apportionment is adopted, the same shall be followed consistently. (q) For determining the transportation cost per unit, distance shall be factored in to arrive at weighted average cost. (r) Abnormal and non recurring cost shall not be a part of transportation cost. 10. Royalty and Technical Know-how.- (a) Adequate records shall be maintained showing royalty or technical know-how fee including other recurring or non-recurring payments of similar nature, if any, made for the goods or services under reference to collaborators or technology suppliers in terms of agreements entered into with them. (b) Royalty and technical know-how Fee paid or incurred in lump-sum or which are in the nature of 'one-time' payment, shall be amortised on the basis of the estimated output or benefit to be derived from the related asset. Amortisation of the amount of royalty or technical know-how fee paid for which ....
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....the benefit is ensued in the current or future periods shall be determined based on 18 the production or service volumes estimated for the period over which the asset is expected to benefit the entity. (c) Amount of the royalty and technical know-how fee shall not include finance costs and imputed costs. (d) Any subsidy or grant or incentive or any such payment received or receivable with respect to amount of royalty and technical know-how fee shall be reduced to measure the amount of royalty and technical know-how fee. (e) Penalties, damages paid to statutory authorities or other third parties shall not form part of the amount of royalty and technical know-how fee. (f) Credits or recoveries relating to the amount royalty and technical know-how fee, material and quantifiable, shall be deducted to arrive at the net amount of royalty and technical know-how fee. (g) Any change in the cost accounting principles applied for the measurement of the amount of royalty and technical know-how fee shall be made only if, it is required by law or a change would result in a more appropriate preparation or presentation of cost statements of an organisation. (h) Royalty and technica....
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....l know-how fee that is directly traceable to a cost object shall be assigned to that cost object. In case such fee is not directly traceable to a cost object then it shall be assigned on any of the following basis, namely:- (i) Units produced; (ii) Units sold; or (iii) Sales value. (i) The amount of royalty fee paid for mining rights shall form part of the cost of material. (j) The amount of royalty and technical know-how fee shall be assigned on the nature or purpose of such fee. The amount of royalty and technical know-how fee related to product or process know how shall be treated as cost of production; if related to trademarks or brands shall be treated as cost of sales. 11. Research and Development Expenses.- (a) Research and development costs shall include all the costs that are directly traceable to research or development activities or that can be assigned to research and development activities strictly on the basis of (a) cause and effect or (b) benefits received. Such costs shall include the following elements, namely:- (i) the cost of materials and services consumed in research and development activities. (ii) cost of bought out materials and hired servic....
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....es as per invoice or agreed price including duties and taxes directly attributable thereto net of trade discounts, rebates, taxes and duties refundable or to be credited. (ii) the salaries, wages and other related costs of personnel engaged in research and development activities; (iv) the depreciation of equipment and facilities, and other tangible assets, and amortisation of intangible assets to the extent that they are used for research and development activities; 19 (v) overhead costs, other than general administrative costs, related to research and development activities. (vi) costs incurred for carrying out research and development activities by other entities and charged to the entity; and (vii) expenditure incurred in securing copyrights or licences; (vii) expenditure incurred for developing computer software; (ix) costs incurred for the design of tools, jigs, moulds and dies; (x) other costs that can be directly attributed to research and development activities and can be identified with specific projects. (b) Subsidy or grant or incentive or amount of similar nature received or receivable with respect to research and development activity, if any, shall be....
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.... reduced from the cost of such research, and development activity. (c) Any abnormal cost where it is material and quantifiable shall not form part of the research and development cost. (d) Fines, penalties, damages and similar levies paid to statutory authorities or other third parties shall not form part of the research and development cost. (e) Research and development costs shall not include imputed costs. (f) Credits or recoveries relating to research and development cost, if material and quantifiable, including from the sale of output produced from the research and development activity shall be deducted from the research and development cost. (g) Research and development costs attributable to a specific cost object shall be assigned to that cost object directly. Research and development costs that are not attributable to a specific product or process shall not form part of the product cost. (h) Development cost which results in the creation of an intangible asset shall be amortised over its useful life. Assignment of development costs shall be based on the principle of "benefits received". (i) Research and development costs incurred for the development and impro....
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....vement of an existing process or product shall be included in the cost of production. In case the Research and development activity related to the improvement of an existing process or product continues for more than one accounting period, the cost of the same shall be accumulated and amortised over the estimated period of use of the improved process or estimated period over which the improved product shall be produced by the entity after the commencement of commercial production, as the case may be, if the improved process or product is distinctly different from the existing process or product and the product is marketed as a new product. The amount allocated to a particular period shall be included in the cost of production of that period. If the expenditure is only to improve the quality of the existing product or minor modifications in attributes, the principle shall not be applied. (j) Development costs attributable to a saleable service namely, providing technical know-how to outside parties shall be accumulated separately and treated as cost of providing the service. 20 12. Quality control expenses.- (a) Adequate records shall be maintained to indicate the expen....
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....ses incurred in respect of quality control department or cost centre or service centre for goods or services under reference. Where these services are also utilized for other goods or services of the company, the basis of apportionment to goods or services under reference and to other goods or services shall be on equitable and reasonable basis and applied consistently. (b) Quality control cost incurred in-house shall be the aggregate of the cost of resources consumed in the quality control activities of the entity. The cost of resources procured from outside shall be determined at invoice or agreed price including duties and taxes, and other expenditure directly attributable thereto net of discounts (other than cash discounts), taxes and duties refundable or to be credited by the Tax Authorities. Such cost shall include cost of conformance to quality, namely, (a) prevention cost; and (b) appraisal cost. (c) Identification of quality control costs shall be based on traceability in an economically feasible manner. (d) Quality control costs other than those referred to above shall be determined on the basis of amount incurred in connection therewith. (e) Finance costs ....
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....incurred in connection with the self-generated or procured resources shall not form part of quality control cost. (f) Quality control costs shall not include imputed costs. (g) Any Subsidy or grant or incentive or any such payment received or receivable with respect to any quality control cost shall be reduced for ascertainment of the cost of the cost object to which such amounts are related. (h) Any abnormal portion of the quality control cost where it is material and quantifiable shall not form part of the cost of quality control. (i) Penalties, damages paid to statutory authorities or other third parties shall not form part of the quality control cost. (j) Any change in the cost accounting principles applied for the measurement of the quality control cost shall be made only if, it is required by law or a change would result in a more appropriate preparation or presentation of cost statements of an organisation. (k) Quality control cost that is directly traceable to the cost object shall be assigned to that cost object. Assignment of quality control cost to the cost objects shall be based on benefits received by them on the principles, namely:- (i) Cause and effec....
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....t - Cause is the process or operation or activity and effect is the incurrence of cost and (ii) Benefits received - overheads are to be apportioned to the various cost objects in proportion to the benefits received by them. 13. Pollution control expenses.- (a) Adequate records shall be maintained to indicate the expenses incurred in respect of pollution control. The basis of apportionment to goods or services under 21 reference and to other goods or services shall be on equitable and reasonable basis and applied consistently. (b) Pollution control costs shall be the aggregate of direct and indirect cost relating to pollution control activity. Direct cost shall include the cost of materials, consumable stores, spares, manpower, equipment usage, utilities, resources for testing and certification and other identifiable resources consumed in activities such as waste processing, disposal, remediation and others. Indirect cost shall include the cost of resources common to various pollution control activities such as pollution control registration and such like expenses. (c) Costs of pollution control which are internal to the entity shall be accounted for when incurred. T....
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....hey shall be measured at the historical cost of resources consumed. (d) Future remediation or disposal costs which are expected to be incurred with reasonable certainty as part of onerous contract or constructive obligation, legally enforceable shall be estimated and accounted based on the quantum of pollution generated in each period and the associated cost of remediation or disposal in future. (e) Contingent future remediation or disposal costs e.g. those likely to arise on account of future legislative changes on pollution control shall not be treated as cost until the incidence of such costs become reasonably certain and can be measured. (f) External costs of pollution which are generally the costs imposed on external parties including social costs are difficult to estimate with reasonable accuracy and are excluded from general purpose cost statements. (g) Social costs of pollution are measured by economic models of cost measurement. The cost by way of compensation by the polluting entity either under future legislation or under social pressure cannot be quantified by traditional models of cost measurement. They are best kept out of general purpose cost statements....
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..... (h) Cost of in-house pollution control activity shall include cost of materials, consumable stores, spares, manpower, equipment usage, utilities, and other resources used in such activity. (i) Cost of pollution control activity carried out by outside contractors inside the entity shall include charges payable to the contractor and cost of materials, consumable stores, spares, manpower, equipment usage, utilities, and other costs incurred by the entity for such jobs. (j) Cost of pollution control jobs carried out by contractor at its premises shall be determined at invoice or agreed price including duties and taxes, and other expenditure directly attributable thereto net of discounts (other than cash discount), taxes and duties refundable or to be credited. This cost shall also include the cost of other resources provided to the contractors. (k) Cost of pollution control jobs carried out by outside contractors shall include charges made by the contractor and cost of own materials, consumable stores, spares, manpower, equipment usage, utilities and other costs used in such jobs. (I) Each type of pollution control namely, water, air, soil pollution shall be treated as a....
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.... distinct activity, if material and identifiable. 22 22 (m) Finance costs incurred in connection with the pollution control activities shall not form part of pollution control costs. (n) Pollution control costs shall not include imputed costs. (o) Price variances related to pollution control, where standard costs are in use, shall be treated as part of pollution control cost. The portion of usage variances attributable to normal reasons shall be treated as part of pollution control cost. Usage variances attributable to abnormal reasons shall be excluded from pollution control cost. (p) Subsidy or grant or incentive or amount of similar nature received or receivable with respect to Pollution control activity, if any, shall be reduced for ascertainment of the cost of the cost object to which such amounts are related. (q) Any Pollution control cost resulting from abnormal circumstances, if material and quantifiable, shall not form part of the pollution control cost. (r) Fines, penalties, damages and similar levies paid to statutory authorities or other third parties shall not form part of the pollution control cost. (s) Credits or recoveries relating to the pollution....
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.... control activity, material and quantifiable, shall be deducted to arrive at the net pollution control cost. (t) Research and development cost to develop new process, new products or use of new materials to avoid or mitigate pollution shall be treated as research and development costs and not included under pollution control costs. Development costs incurred for commercial development of such product, process or material shall be included in pollution control costs. (u) Any change in the cost accounting principles applied for the measurement of the pollution control cost shall be made only if, it is required by law or a change would result in a more appropriate preparation or presentation of cost statements of an organisation. (v) Pollution Control costs shall be traced to a cost object to the extent economically feasible. (w) Direct costs of pollution control such as treatment and disposal of waste shall be assigned directly to the product, where traceable economically. (x) Where these costs are not directly traceable to the product but are traceable to a process which causes pollution, the costs shall be assigned to the products passing through the process based on ....
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....the quantity of the pollutant generated by the product. (y) Where the pollution control cost is not directly traceable to cost object, it shall be treated as overhead and assigned based on either of the following two principles; namely:- (1) Cause and Effect - Cause is the process or operation or activity and effect is the incurrence of cost and (2) Benefits received - overheads are to be apportioned to the various cost objects in proportion to the benefits received by them. 14. Service department expenses. (a) Proper records shall be maintained in respect of service departments, that is, cost centres which primarily provides auxiliary services across the enterprise, 23 to indicate expenses incurred in respect of each such service cost centre like engineering, work shop, designing, laboratory, safety, transport, computer cell, welfare and other related centres. (b) Each identifiable service cost centre shall be treated as a distinct cost object for measurement of the cost of services subject to the principle of materiality. (c) Cost of service cost centre shall be the aggregate of direct and indirect cost attributable to services being rendered by such cost centre. ....
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....(d) Cost of in-house services shall include cost of materials, consumable stores, spares, manpower, equipment usage, utilities, and other resources used in such service. (e) Cost of other resources shall include related overheads. (f) Cost of services rendered by contractors within the facilities of the entity shall include charges payable to the contractor and cost of materials, consumable stores, spares, manpower, equipment usage, utilities, and other resources provided to the contractors for such services. (g) Cost of services rendered by contractors at their premises shall be determined at invoice or agreed price including duties and taxes, and other expenditure directly attributable thereto net of discounts (other than cash discount), taxes and duties refundable or to be credited. This cost shall also include the cost of resources provided to the contractors. (h) Cost of services for the purpose of inter unit transfers shall also include distribution costs incurred for such transfers. (i) Cost of services for the purpose of inter-company transfers shall also include distribution cost incurred for such transfers and administrative overheads. (j) Cost of services r....
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....endered to outside parties shall also include distribution cost incurred for such transfers, administrative overheads and marketing overheads. (k) Finance costs incurred in connection with the service cost Centre shall not form part of the cost of Service Cost Centre. (I) The cost of service cost centre shall not include imputed costs. (m) Where the cost of service cost centre is accounted at standard cost, the price and usage variances related to the services cost Centre shall be treated as part of cost of services. Usage variances due to abnormal reasons shall be treated as part of abnormal cost. (n) Any Subsidy or grant or incentive or any such payment received or receivable with respect to any service cost centre shall be reduced for ascertainment of the cost to which such amounts are related. (o) The cost of production and distribution of the service shall be determined based on the normal capacity or actual capacity utilization whichever is higher and unabsorbed cost, if any, shall be treated as abnormal cost. Cost of a stand-by service shall include the committed costs of maintaining such a facility for the service. (p) Any abnormal cost where it is material a....
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....nd quantifiable shall not form part of the cost of the service cost centre. (q) Penalties, damages paid to statutory authorities or other third parties shall not form part of the cost of the service cost centre. 24 (r) Credits or recoveries relating to the service cost centre including charges for services rendered to outside parties, material and quantifiable, shall be reduced from the total cost of that service cost centre. (s) Any change in the cost accounting principles applied for the measurement of the cost of Service cost centre shall be made, only if it is required by law or a change would result in a more appropriate preparation or presentation of cost statements of an enterprise. (t) While assigning cost of services, traceability to a cost object in an economically feasible manner shall be the guiding principle. (u) Where the cost of services rendered by a service cost centre is not directly traceable to a cost object, it shall be assigned on the most appropriate basis. (v) The most appropriate basis of distribution of cost of a service cost centre to the cost centres consuming services is to be derived from logical parameters related to the usage of the s....
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....ervice rendered. The parameter shall be equitable, reasonable and consistent. 15. Packing expenses.- (a) Proper records shall be maintained separately for domestic and export packing showing the quantity and cost of various packing materials and other expenses incurred on primary or secondary packing indicating the basis of valuation. (b) The packing material receipts shall be valued at purchase price including duties and taxes, freight inwards, insurance, and other expenditure directly attributable to procurement (net of trade discounts, rebates, taxes and duties refundable or to be credited) that can be quantified at the time of acquisition. (c) Finance costs directly incurred in connection with the acquisition of packing material shall not form part of packing material cost. (d) Self-manufactured packing materials shall be valued including direct material cost, direct employee cost, direct expenses, job charges, factory overheads including share of administrative overheads comprising factory management and administration and share of research and development cost incurred for development and improvement of existing process or product. (e) Normal loss or spoilage o....
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....f packing material prior to receipt in the factory shall be absorbed in the cost of balance materials net of amounts recoverable from suppliers, insurers, carriers or recoveries from disposal. (f) The forex component of imported packing material cost shall be converted at the rate on the date of the transaction. Any subsequent change in the exchange rate till payment or otherwise shall not form part of the packing material cost. (g) Any demurrage, detention charges or penalty levied by the transport agency or any authority shall not form part of the cost of packing materials. (h) Any subsidy or grant or incentive or any such payment received or receivable with respect to packing material shall be reduced for ascertainment of the cost to which such amounts are related. 25 (i) Issue of packing materials shall be valued using appropriate assumptions on cost flow, namely, First In First Out, Last In First Out, weighted average rate. The method of valuation shall be followed on a consistent basis. (j) Wherever, packing material costs include transportation costs, the determination of costs of transportation shall be in accordance with para No. 9 on determination of cost o....
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....f transportation. (k) Packing material costs shall not include imputed costs. (1) Where packing materials are accounted at standard cost, the price variances related to such materials shall be treated as part of packing material cost and the portion of usage variances due to normal reasons shall be treated as part of packing material cost. Usage variances due to abnormal reasons shall be treated as part of abnormal cost. (m) The normal loss arising from the issue or consumption of packing materials shall be included in the packing materials cost. (n) Any abnormal cost where it is material and quantifiable shall be excluded from the packing material cost. (o) The credits or recoveries in the nature of normal scrap arising from packing materials if any, shall be deducted from the total cost of packing materials to arrive at the net cost of packing materials. (p) Packing material costs shall be directly traced to a cost object to the extent it is economically feasible. (q) Where the packing material costs are not directly traceable to the cost object, these may be assigned on the basis of quantity consumed or similar measures like technical estimates. (r) The packing m....
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....aterial cost of reusable packing shall be assigned to the cost object taking into account the number of times or the period over which it is expected to be reused. (s) Cost of primary packing materials shall form part of the cost of production. (t) Cost of secondary packing materials shall form part of distribution overheads. 16. Interest and financing charges. (a) Interest and financing charges are costs incurred by an enterprise in connection with the borrowing of fund or other costs which in effect represent payment for the use of non-equity fund. (b) Interest and financing charges incurred shall be identified for- (i) acquisition or construction or production of qualifying assets including fixed assets; and (ii) other finance costs for production of goods or operations or services rendered which cannot be classified as qualifying assets. (c) Interest and financing charges directly attributable to the acquisition or construction or production of a qualifying asset shall be included in the cost of the asset. (d) Interest and financing charges shall not include imputed costs. (e) Subsidy or grant or incentive or amount of similar nature received or receivable with re....
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....spect to Interest and Financing Charges if any, shall be reduced to ascertain the net interest and financing charges. (f) Penal Interest for delayed payment, fines, penalties, damages and similar levies paid to statutory authorities or other third parties shall not form part of the interest and financing charges. In case 26 the company delays the payment of statutory dues beyond the stipulated date, interest paid for delayed payment shall not be treated as penal interest. (g) Interest paid for or received on investment shall not form part of the other financing charges for production of goods or operations or services rendered; (h) Assignment of interest and financing charges to the cost objects shall be based on either of the following two principles; namely:- (1) Cause and Effect - Cause is the process or operation or activity and effect is the incurrence of cost and (2) Benefits received - to be apportioned to the various cost objects in proportion to the benefits received by them. 17. Any other item of cost.- Proper records shall be maintained for any other item of cost being indispensable and considered necessary for inclusion in cost records for calculating c....
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....ost of production of goods or rendering of services, cost of sales, margin in total and per unit of the goods or services under reference. 18. Capacity determination. (a) Capacity shall be determined in terms of units of production or equivalent machine or man hours. (b) Installed capacity is determined based on- (i) manufacturers' Technical specifications; (ii) capacities of individual or interrelated production centres; (iii) operational constraints or capacity of critical machines; or (iv) number of shifts (c) In case manufacturers' technical specifications are not available, the estimates by technical experts on capacity under ideal conditions shall be considered for determination of installed capacity. In case any production facility is added or discarded the installed capacity shall be reassessed from the date of such addition or discard. In case the same is reassessed as per direction of the Government, it shall be in accordance with the principles laid down in the said directives. In case of improvement in the production process, the installed capacity shall be reassessed from the date of such improvement. (d) Normal capacity shall be determined vis-a-vis i....
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....nstalled capacity after carrying out adjustments for (i) holidays, normal shut down days and normal idle time; (ii) normal time lost in batch change over; (iii) time lost due to preventive maintenance and normal break downs of equipments; (iv) loss in efficiency due to ageing of the equipment; or (v) number of shifts; (e) Capacity utilization is actual production measured as a percentage of installed capacity. 19. Work-in-progress and finished stock. The method followed for determining the cost of work-in- progress and finished stock of the goods and for services under delivery or in-process shall be 27 appropriate and shall be indicated in the cost records so as to reveal the cost element that have been taken into account in such computation. All conversion costs incurred in bringing the inventories to their present location and condition shall be taken into account while computing the cost of work-in-progress and finished stock. The method adopted for determining the cost of work- in progress and finished goods shall be followed consistently. 20. Captive consumption.- If the goods or services under reference are used for captive consumption, proper records shall b....
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....e maintained showing the quantity and cost of each such goods or services transferred to other departments or cost centres or units of the company for self-consumption and sold to outside parties separately. 21. By-Products and Joint Products.- (a) Proper records shall be maintained for each item of by- product, if any, produced showing the receipt, issues and balances, both in quantity and value. The basis adopted for valuation of by-product for giving credit to the respective process shall be equitable and consistent and shall be indicated in cost records. Records showing the expenses incurred on further processing, if any, and actual sales realisation of by-product shall be maintained. The proper records shall be maintained in respect of credits or recoveries from the disposal of by- products. (b) Proper records shall be maintained the cost up to the point of separation of products or services shall be apportioned to joint products or services on reasonable and equitable basis and shall be applied consistently. The basis on which such joint costs are apportioned to different products or services arising from the process shall be indicated in the cost records. Proper....
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.... records shall be maintained in respect credits or recoveries from the disposal of joint products or services. 22. 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 goods or services under such system. The cost variances shall be shown against separate heads and analyzed into material, labour, 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 goods or services shall be indicated clearly in the cost records. The reasons for the variances shall be duly explained in the cost records and statements. 23. Reconciliation of cost and financial accounts.- 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 adjust the profit of the goods or services under reference with the overall profit of the company. The variations, if....
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.... any, shall be clearly indicated and explained. 24. Related party transactions.- (a) Related Party means related party as defined under clause (76) of section 2 of the Companies Act, 2013 (18 of 2013). 28 (b) "Normal" price means price charged for comparable and similar products in the ordinary course of trade and commerce where the price charged in the sole consideration of sale and such sale is not made to a related party. Normal price can be construed to be a price at which two unrelated and non-desperate parties would agree to a transaction and where such transaction is not clouded due to the proximity of the parties to the transaction and free from influence though the parties may have shared interest. (c) The basis adopted to determine Normal price shall be classified as under: Comparable uncontrolled price method; (Resale price method; (Cost plus method; () Profit split method; M Transactional net margin method; or (w) Any other method, to be specified. (d) In respect of related party transactions or supplies made or services rendered by a company to a company termed "related party relationship" and vice-a-versa, records shall be maintained showing contra....
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....cts entered into, agreements or understanding reached in respect of- () purchase and sale of raw materials, finished goods, rendering of services, process materials and rejected goods including scraps and other related materials; (i) utilisation of plant facilities and technical know-how; (supply of utilities and any other services; (iv) administrative, technical, managerial or any other consultancy services; (v) purchase and sale of capital goods including plant and machinery; and (vi) any other payment related to the production of goods or rendering of services under reference. (e) These records shall also indicate the basis followed for arriving at the rates charged or paid for such goods or services so as to enable determination of the reasonableness of such rates in so far as they are in any way related to goods or services under reference. 25. Expenses or incentives on exports.- (a) Proper records showing the expenses incurred on the export sales, if any, of the goods or services under reference shall be separately maintained so that the cost of export sales can be determined correctly. Separate cost statements shall be prepared for goods or services exported gi....
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....ving details of export expenses incurred or incentive earned. (b) Proper records shall be maintained giving the details of export commitments license-wise and the fulfillment of these commitments giving the reasons for non-compliance, if any. In case, duty free imports are made, the cost statements shall reflect this fact. If the duty free imports have been made after actual production, the statement shall reflect this fact also. 26. Production Records.- Quantitative records of all finished goods (packed or unpacked) or services rendered showing production, issues for sales and balances of different type of the goods or services 29 under reference, shall be maintained. The quantitative details of production of goods or services rendered shall be maintained separately for self-produced, third party on job work, loan license basis etc. 27. Sales records.- 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 or inter unit transfer. In case of services details of domestic delivery o....
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....r sales at control price, domestic delivery or sales at market price, export delivery or sales under advance license, export delivery or sales under other obligations, export delivery or sales at market price, and delivery or sales to related party or inter unit transfer. Such details shall be maintained separately for each plant or unit wise or service center wise for total as well as per unit sales realization. 28. Cost statements.- (a) Cost statements (monthly, quarterly and annually) showing quantitative information in respect of each good or service under reference shall be prepared showing details of available capacity, actual production, production as per excise records, capacity utilization (in- house), stock purchased for trading, stock and other adjustments, quantity available for sale, wastage and actual sale during current financial year and previous year. (b) Such statements shall also include details in respect of all major items of costs constituting cost of production of goods or services, cost of sales of goods or services and margin in total as well as per unit of the goods or services. The goods or services emerging from a process, which forms raw ma....
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....terial or an input material or service for a subsequent process, shall be valued at the cost of production or cost of service up to the previous stage. (c) Cost Statements (monthly, quarterly and annually) in respect of reconciliation of indirect taxes showing details of total clearances of goods or services, assessable value, duties or taxes paid, CENVAT or VAT or Service Tax credit utilized, duties or taxes recovered and interest or penalty paid. (d) If the company is operating more than one plant, factory or service centre, separate cost statements as specified above shall be prepared in respect of each plant, factory or service centre. (e) Any other statement or information considered necessary for suitable presentation of costs and profitability of goods or services produced by the company shall also be prepared. 29. Statistical Records. (a) The records regarding available machine hours or direct labour hours in different production departments and actually utilized shall be maintained for production of goods or rendering of services under reference and shortfall suitably analyzed. Suitable records for computation of idle time of machines or labour shall also be ma....
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....intained and analyzed. (b) Proper records shall be maintained to enable the company to identify the capital employed, net fixed assets and working capital separately for the production of goods or rendering of services under reference and other goods or services to the extent such elements are separately identifiable. Non-identifiable items shall be allocated on a suitable and reasonable basis to different goods or 30 services. Fresh investments on fixed assets for production of goods or rendering of services under reference that have not contributed to the production of goods or rendering of services during the relevant period or year shall be indicated in the cost records. The records shall, in addition, show assets added as replacement and those added for increasing existing capacity. 30. Records of Physical Verification.- Records of physical verification may be maintained in respect of all items held in the stock such as raw materials, process materials, packing materials, consumables stores, machinery spares, chemicals, fuels, finished goods and fixed assets etc. Reasons for shortages or surplus arising out of such verifications and the method followed for adjusti....
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....ng the same in the cost of the goods or services shall be indicated in the records. Document 3 Form CRA-3 [Pursuant to rule 6(4) of the Companies (Cost Records and Audit) Rules, 2014] FORM OF THE COST AUDIT REPORT I/We,.. Act, 2013(18 of 2013) of office at..... having been appointed as Cost Auditor(s) under section 148(3) of the Companies ..........(mention name of the company) having its registered (mention registered office address of the company) (hereinafter referred to as the company), have audited the Cost Records maintained under section 148 of the said Act, in compliance with the cost auditing standards, in respect of the......... [mention name (s) of Product(s)/service(s)] for the period/year.........................mention the financial year) maintained by the company and report, in addition to my/our observations and suggestions in para 2. (i) I/We have/have not obtained all the information and explanations, which to the best of my/our knowledge and belief were necessary for the purpose of this audit. (ii) In my/our opinion, proper cost records, as per rule 5 of the Companies (Cost Records and Audit) Rules, 2014 have/have not been maintained by the comp....
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....any in respect of product(s)/service(s) under reference. (iii) In my/our opinion, proper returns adequate for the purpose of the cost audit have/have not been received from the branches not visited by me/us. (iv) In my/our opinion and to the best of my/our information, the said books and records give/do not give the information required by the Companies Act, 2013, in the manner so required. (v) In my/our opinion, the company has/does not have adequate system of internal audit of cost records which to my/our opinion is commensurate to its nature and size of its business. (vi) In my/our opinion, information, statements in the annexure to this cost audit report gives/does not give a true and fair view of the cost of production of product(s)/rendering of service(s), cost of sales, margin and other information relating to product(s)/service(s) under reference. 31 (vii) Detailed unit-wise and product/service-wise cost statements and schedules thereto in respect of the product /service under reference of the company duly audited and certified by me/us are/are not kept in the company. Observations and suggestions, if any, of the Cost Auditor, relevant to the cost audit. Date....
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....d: this day of 20 (mention name of place of signing this report) SIGNATURE AND SEAL OF THE COST AUDITOR (S) MEMBERSHIP NUMBER (S) Notes.- (1) Delete words not applicable. (2) If as a result of the examination of the books of account, the cost auditor desires to point out any material deficiency or give a qualified report, he/she shall indicate the same against the relevant para (i) to (vil) in the prescribed form of the Cost Audit Report giving details of discrepancies he/she has come across. (3) The report, suggestions, observations and conclusions given by the cost auditor under this paragraph shall be based on verified data, reference to which shall be made here and shall, wherever practicable, be included after the company has been afforded an opportunity to comment on them. 1. General Information Annexure to the Cost Audit Report PART-A 1 Corporate identity number or foreign company registration number 2 Name of company 3 Address of registered office or of principal place of business in India of company 4 Address of corporate office of company 5 Email address of company 6 Date of beginning of reporting Financial Year dd/mm/yyyy 32 32 7 Date of ....
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....end of reporting Financial Year 8 Date of beginning of previous financial year 9 Date of end of previous financial year 10 Level of rounding used in cost statements 11 Reporting currency of entity 12 Number of cost auditors for reporting period 13 33 14. 15 Date of board of directors meeting in which annexure to cost audit report was approved Whether cost auditors report has been qualified or has any reservations or contains adverse remarks Consolidated qualifications, reservations or adverse remarks of all cost auditors 16 Consolidated observations or suggestions of all cost auditors 17 Whether company has related party transactions for sale or purchase of goods or services dd/mm/yyyy dd/mm/yyyy dd/mm/yyyy Absolute/thousands/lacs/crores INR 2. General Details of Cost Auditor 1 Whether cost auditor is lead auditor 2 Category of cost auditor 3 Firm's registration number 4 Name of cost auditor/cost auditor's firm 5 PAN of cost auditor/cost auditor's firm 6 Address of cost auditor or cost auditor's firm 7 Email id of cost auditor or cost auditor's firm 8 9 Name of member signing report Membership number of member signing report 10 Name(s) of prod....
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....uct(s) or service(s) with CETA heading 11 12 12 22 13 SRN number of Form 23C/CRA-2 Number of audit committee meeting attended by cost auditor during year Date of signing cost audit report and annexure by cost auditor 33 14 Place of signing cost audit report and annexure by cost auditor 3. Cost Accounting Policy.- (1) Briefly describe the cost accounting policy adopted by the Company and its adequacy or otherwise to determine correctly the cost of production/operation, cost of sales, sales realization and margin of the product(s)/service(s) under reference separately for each product(s)/service(s). The policy shall cover, inter alia, the following areas: (a) Identification of cost centres/cost objects and cost drivers. (b) Accounting for material cost including packing materials, stores and spares, employee cost, utilities and other relevant cost components. (c) Accounting, allocation and absorption of overheads. (d) Accounting for depreciation/amortization. (e) Accounting for by-products/joint-products or services, scarps, wastage etc. (f) Basis for Inventory Valuation. (g) Methodology for valuation of Inter-Unit/Inter Company and Related Party transactio....
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....ns. (h) Treatment of abnormal and non-recurring costs including classification of other non-cost items. (i) Other relevant cost accounting policy adopted by the Company. (2) Briefly specify the changes, if any, made in the cost accounting policy for the product(s)/service(s) under audit during the current financial year as compared to the previous financial year. (3) Observations of the Cost Auditor regarding adequacy or otherwise of the Budgetary Control System, if any, followed by the company. 4. PRODUCT/SERVICE DETAILS (for the company as a whole) Name of Product(s)/Service(s) UOM CETA heading (wherever applicable) Whether Covered Net Operational Revenue (net of taxes, duties etc.) under Cost Audit Current Year Previous Year Yes/No Rs. Rs. 1. 2. 3. 4. 34 Total net revenue from operations Other Incomes of company Total revenue as per financial accounts Extra ordinary income, if any Total revenue including extra ordinary income, if any Turnover as per Excise/Service Tax Records Note: Explain the difference, if any, between Turnover as per Annual Accounts and Turnover as per Excise/Service Tax Records. PART-B For Manufacturing Sector 1. ....
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....QUANTITATIVE INFORMATION (for each product with CETA heading separately) Name of Product CETA heading Particulars 1. Available Capacity (a) Installed Capacity (b) Capacity enhanced during the year, if any (c) Capacity available through leasing arrangements, if any (d) Capacity available through loan license/third parties (e) Total available Capacity 2. Actual Production (a) Self manufactured (b) Produced under leasing arrangements (c) Produced on loan license / by third parties on job work (d) Total Production 3. Production as per Excise Records Unit Current Year Previous Year 35 35 4. Capacity Utilization (in-house) 5. Finished Goods Purchased (a) Domestic Purchase of Finished Goods (b) Imports of Finished Goods (c) Total Finished Goods Purchased 6. Stock and Other Adjustments (a) Change in Stock of Finished Goods (b) Self/ Captive Consumption (incl. samples etc.) (c) Other Quantitative Adjustments, if any (wastage etc.) (d) Total Adjustments 7. Total Available Quantity for Sale [2(d) + 5(c) + 6(d)] 8. Actual Sales (a) Domestic Sales of Product (b) Domestic Sales of Traded Product (c) Export Sale of Product (d) Export Sale of Traded Product (e)....
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.... Total Quantity Sold 2. ABRIDGED COST STATEMENT (for each product with CETA heading separately) Name of Product CETA heading Unit of Measure Finished Production Goods Purchased Finished Stock Adjustment Captive Consumption Other Adjustments Quantity Sold Current Year Previous Year Sno. Particulars 1 Materials Consumed (specify details as per Para 2A) 2 Process Materials/Chemicals 3 Utilities (specify details as per 2B) Current Year Previous Year Amount Rate per (Rs.) Unit (Rs.) Amount (Rs.) Rate per Unit (Rs.) 36 4 Direct Employees Cost 5 Direct Expenses 6 Consumable Stores and Spares 7 Repairs and Maintenance 8 Quality Control Expenses 9 Research and Development Expenses 10 10 Technical know-how Fee/Royalty 11 Depreciation/Amortization 112 13 14 15 16 17 Other Production Overheads Industry Specific Operating Expenses (specify details as per Para 2C) Total (1 to 13) Increase/Decrease in Work-in-Progress Less: Credits for Recoveries, if any 17 Primary Packing Cost 18 Cost of Production/Operations (14+ 15 to 17) 19 Cost of Finished Goods Purchased 20 Total Cost of Production and Purchases (18+ 19) 220 21 Increase....
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..../Decrease in Stock of Finished Goods 22 Less: Self/Captive Consumption (incl. Samples, etc.) 23 Other Adjustments (if any) 24 25 25 Cost of Production/Operation of Product Sold (20 + 21 to 23) Administrative Overheads 26 Secondary Packing Cost 27 Selling and Distribution Overheads 28 Cost of Sales before Interest (24 to 27) 22 Interest and Financing Charges 30 Cost of Sales (28 +29) 31 Net Sales Realization (Net of Taxes and Duties) 32 Margin [Profit/(Loss) as per Cost Accounts] (31-30) 37 Notes: 1. Separate cost statement shall be prepared for each CETA heading representing the product. 2. In case the same product has different unit of measure, separate cost statement shall be provided for different unit of measures. The items of cost shown in the Proforma are indicative and the same shall be reflected keeping in mind the 3. materiality of the item of cost in the product. The Proforma may be suitably modified to meet the requirement of the industry/product. 4. In case the company follows a pre-determined or standard costing system, the above cost statement shall reflect figures at actuals after adjustment of variances, if any. 2A. Details of Materials ....
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....Consumed Name of Product CETA heading Current Year Previous Year Description of Category UOM Material Quantity Rate per Unit (Rs.) Amount Quantity Rate per Unit (Rs.) Amount 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Category: Indigenous/ Imported/ Self Manufactured 2B. Details of Utilities Consumed Name of Product CETA heading 38 38 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Current Year Previous Year Description of Material UOM Quantity Rate per Unit (Rs.) Amount Quantity Rate per Unit (Rs.) Amount 2C. Details of Industry Specific Operating Expenses Name of Product CETA heading Current Year Previous Year Description of Industry Specific Operating Expenses Amount Amount 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 39 39 PART-C For Service Sector Unit of Measurement Current Year Previous Year 1. QUANTITATIVE INFORMATION (for each service separately) Name of Service Service Code (if applicable) Particulars 1. Available Capacity (a) Installed Capacity (b) Capacity enhanced during the year, if any (c) Total available Capacity 2. Actual Services Provided (a) Own Services (b) Services under contractual arrangements (c) Outsourced Serv....
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....ices (d) Total Services 3. Total Services provided as per Service Tax Records 4. Capacity Utilization (in-house) 5. Actual Sales (a) Services rendered - Domestic (b) Services rendered - Export (c) Total Services Rendered 2. ABRIDGED COST STATEMENT (for each service separately) Name of Service Service Code (if applicable) Unit of Measure Current Year Services Captive Provided Consumption Other Adjustments Services rendered 40 40 Previous Year Sno. Particulars Current Year Amount Previous Year Rate per Amount Rate per (Rs.) Unit (Rs.) Materials Consumed (specify details as per Para 2A) (Rs.) Unit (Rs.) 1 2 Utilities (specify details as per Para 2B) 3 Direct Employees Cost 4 Direct Expenses 5 Consumable Stores and Spares 6 Repairs and Maintenance 7 Quality Control Expenses 8 Research and Development Expenses 9 Technical know-how Fee / Royalty 10 11 12 22 Depreciation/Amortization Other Overheads Industry Specific Operating Expenses (specify details as per Para 2C) Total (1 to 12) 13 14 Less: Credits for Recoveries, if any 15 Cost of Services provided (13-14) 16 Cost of Outsourced/Contractual Services 17 Total Service....
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....s available 18 Less: Self/Captive Consumption 19 Other Adjustments (if any) 220 21 Cost of Services Sold (17-18 +19) Administrative Overheads 22 Selling and Distribution Overheads 23 23 Cost of Sales before Interest (20+21+22) Interest and Financing Charges 24 25 25 Cost of Sales (23+24) 41 26 Net Sales Realization (Net of Taxes and Duties) 27 Margin [Profit/(Loss) as per Cost Accounts] (26 - 25) NOTES: 1. Separate cost statement shall be prepared for each service 2. 3. 4. The items of cost shown in the Proforma are indicative and the same shall be reflected keeping in mind the materiality of the item of cost in the service. The Proforma may be suitably modified to meet the requirement of the industry/service. In case the company follows a pre-determined or standard costing system, the above cost statement shall reflect figures at actuals after adjustment of variances, if any. 2A. Details of Materials Consumed Name of Service Service Code (if applicable) Current Year Previous Year Description of Material Category UOM Quantity Rate per Unit (Rs.) Amount Quantity Rate per Unit (Rs.) 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Category: In....
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....digenous/ Imported/ Self Manufactured Amount 42 22 1. 2. 3. 4. 5. 6. 7. 8. 9. 10 10. 2B. Details of Utilities Consumed Name of Service Service Code (if applicable) Current Year Description of Material UOM Quantity Rate per Unit (Rs.) Previous Year Rate per Amount Quantity Unit (Rs.) 2C. Details of Industry Specific Operating Expenses Name of Service Service Code (if applicable) Current Year Previous Year Description of Industry Specific Operating Expenses Amount Amount 1. 2. 3. 4. 5. 6. 7. 33 43 Amount 8. 9. 10. PART-D 1. PRODUCT AND SERVICE PROFITABILITY STATEMENT (for audited products/services) Current Year Previous Year Sno. Particulars Cost of Sales Margin Sales Sales Cost of Sales Margin Rs. Rs. Rs. Rs. Rs. Rs. Product 1 Product 2 Product 3 ......etc. Service 1 Service 2 Service 3 ....... etc. Total 2. PROFIT RECONCILIATION (for the company as a whole) Sno. Particulars 1 Profit or Loss as per Cost Accounting Records (a) For the audited product(s)/service(s) (b) For the un-audited product(s)/service(s) Add: Incomes not considered in cost accounts (specify details) 2 a) b) c) Current Year P....
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....revious Year Rs. Rs. 44 3 d) e) f) g) h) 1) j) Less: Expenses not considered in cost accounts (specify details) a) h) c) d) e) f) g) h) 4 i) j) Difference in Valuation of stock between financial accounts and cost accounts 5. Other adjustments, if any 6 Profit or Loss as per Financial Accounts Note: Show abnormal wastages, expenses on strikes/lock-outs and any other items of expenses or incomes of abnormal nature etc. not considered in cost separately 3. VALUE ADDITION AND DISTRIBUTION OF EARNINGS (for the company as a whole) S.no. Particulars Value Addition: 1 Gross Sales (excluding sales returns) 2 Less: Excise duty, etc. Current Year Previous Year Rs. Rs. 45 45 Add: Export Incentives 3 Net Sales 4 5 6 Add/Less: Adjustment in Finished Stocks Less: Cost of bought out inputs (a) Cost of Materials Consumed (b) Process Materials/Chemicals (c) Consumption of Stores and Spares (d) Utilities (e.g. power and fuel) (e) Others, if any Total Cost of bought out inputs 7 Value Added 8 Add: Income from any other sources 9 Add: Extra Ordinary Income 10 Earnings available for distribution 1 Distribution of Earnings to: Employees a....
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....s salaries and wages, retirement benefits, etc. Shareholders as dividend 2 3 Company as retained funds 4 Government as taxes (specify) 5 Extra Ordinary Expenses 6 Others, if any (specify) 7 Total distribution of earnings 4. FINANCIAL POSITION AND RATIO ANALYSIS (for the company as a whole) Sno. Particulars A. Financial Position 1 Share Capital 2 Reserves and Surplus 3 Long Term Borrowings 4 (a) Gross Assets (b) Net Assets 5 (a) Current Assets (b) Less: Current Liabilities Units Current Year Previous Year 46 B. (c) Net Current Assets 6 Capital Employed 7 Net Worth Financial Performance 1 Value Added 2 3 Net Revenue from Operations of Company Profit before Tax (PBT) C. Profitability Ratios 1 PBT to Capital Employed (B3/A6) % 2 PBT to Net Worth (B3/A7) % 3 PBT to Value Added (B3/B4) % 4 PBT to Net revenue from Operations (B3/B2) % D. Other Financial Ratios 1 Debt-Equity Ratio 2 Current Assets to Current Liabilities 3 Valued Added to Net Revenue from Operations % E. Working Capital Ratios 1 Raw Materials Stock to Consumption 2 Stores and Spares to Consumption 3 Finished Goods Stock to Cost of Sales Months Months....
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.... Months Note.- 1 Capital Employed means average of net fixed assets (excluding effect of revaluation of fixed assets) plus Non-current investments and net current assets existing at the beginning and close of the financial year. Note.-2 Net Worth is as defined under clause (57) of section 2 of the Companies Act, 2013. 5. RELATED PARTY TRANSACTIONS (for the company as a whole) Sno. Name Name of Nature of Quantity Transfer Amount Normal Basis adopted and the Transacti Price Price Address Product/on (Sale, of the Related Service Purchase to determine the Normal Price etc.) Party F 2 3 A 47 5 9 8 2 10 NOTE.1 Details shall be furnished for each Related Party and Product/Service separately. NOTE.2 Details of Related Party transactions without indicating the Normal Price and the basis thereof shall be considered as incomplete information. 6. Reconciliation of Indirect Taxes (for the Company as a whole) Particulars Duties/Taxes Payable Excise Duty 1 Domestic 2 Export 3 Stock Transfers (Net) 4 Duty Free Clearance, Others etc. 5 Total Excise Duty (1 to 4) 6 Service Tax 7 VAT, CST etc. 8 Other State Taxes, if any 9 Total Duties/Taxes Payab....
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....le (5 to 8) Duties/Taxes Paid 10 Cenvat/VAT Credit Utilised - Inputs 11 Cenvat/VAT Credit Utilised - Capital Goods Assessab le Value Excise Service Duty Tax Cess and Others VAT Rs. Rs. Rs. Rs. Rs. 48 12 Cenvat/VAT Credit Utilised - Input Services 13 Cenvat/VAT Credit Utilised - Others 14 Total (10 to 13) 15 Paid through PLA/Cash 16 Total Duties/Taxes Paid (14+15) Duties/Taxes Recovered 17 18 Difference between Duties/Taxes Paid and Recovered 19 Interest/Penalty/Fines Paid Note: Provide separate amounts in notes in respect of Item 4 above. Note. SIGNATURE NAME COST AUDITOR MEMBERSHIP NUMBER SIGNATURE NAME COMPANY SECRETARY/DIRECTOR SEAL DATE SIGNATURE NAME DIRECTOR MEMBERSHIP/DIN NUMBER DIN NUMBER STAMP STAMP DATE DATE Note (1) Wherever, there is any significant variation in the current year's figure over the previous year's figure for any item shown under each para of the Annexure to the Cost Audit Report, reasons thereof shall be given by the Cost Auditor. Note (2) Wherever, duration of the current year or the previous year is not 12 (twelve) months, same shall be clearly indicated in the Report.<br> Scholarly articles for kno....
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