This article throws light upon the seven basics common to the cost account record rules. The basics are: 1. Materials 2. labour 3. Utilities 4. Depreciation 5. Effluent Treatment 6. Physical Determinants 7. Determinants of Costs.
Cost Account Record Rules: Basic # 1. Materials:
(a) Materials are variously classified as Raw materials, Process materials/Chemicals, Consumable stores. Small Tools, Machinery Spares, Packing materials, etc.
(b) In the absence of any specific requirement to maintain a combined record for the quality and value of each kind and grade of materials, the quantity records and the value records kept separately at the stores and works accounts departments respectively are acceptable.
(c) In case of certain companies and industries following the systems of ABC analysis, there may be distinct quantity and value records for A items or A and B items but no such records for C items. All purchases of C items might have been treated as consumed. In certain cases, Bin Cards are maintained for physical control in respect of C items purely as indicators for material movements.
Proper judgement needs to be exercised in accepting such records depending upon the circumstances and prevalent practices in each company.
(d) The cost of materials is required to be shown at ‘Cost to Works’. Proper judgement is needed as to whether ‘cost to works’ would mean only direct costs on getting materials to the works or also the attendant costs of purchase, inspection, quality control and stores departments.
(e) The records of materials shall include:
(i) stores ledgers, supported by delivery challans, goods receipt notes, issue requisitions, bin cards, and other documents showing the quantity and value of receipts, issues and balances;
(ii) Purchase journals/bills, and debit/credit notes;
(iii) Import registers and landed costs sheets together with the suppliers’ bills;
(iv) Statements of physical stock verification and periodical inventory.
(f) The materials consumption records shall show the product-wise/process-wise consumption in quantity and value.
(g) The records of scrap, wastages, spoilages, rejections and losses of materials should indicate the quantities generated, used, remade and sold and the realisable value of each type and their treatment in cost accounts.
(h) The input/output reconciliation with reference to the company’s own accounts and excise records for the evaluation of material yield should be judged on merits of each case.
Cost Account Record Rules: Basic # 2. Labour:
(a) The records like payroll or pay sheet, wages/salary sheet shall be prepared cost centre-wise under various categories of employment and earnings supported by attendance registers/cards and job sheets and shall indicate earning categories such as overtime, piece rate, incentives, casual payments, etc.;
(b) In case of inter-departmental transfers of labour, cost-centre-wise allocation shall show deployment of labour of different categories, both in quantity and value.
(c) The costs of labour idle time and labour utilisation for capital works together with the bases for allocation to cost centres shall be indicated in the payrolls/wages sheets.
(d) The labour employment/engagement reconciliation with reference to the job cards/process records/attendance sheets for the evaluation of labour utilisation and idle time should be made and studied.
(e) The payroll summary should be in a classified form indicating cost centre-wise distribution of payroll costs.
(f) The payments of annual bonus to employees other than incentive bonus, and provision for statutory gratuity or actual amount paid shall not be clubbed with the salaries and wages,
(g) The records for labour shall include:
(i) Pay rolls supported by disbursement vouchers, attendance sheets, leave and absenteeism records, inter-departmental labour transfer notes;
(ii) Casual labour hires bills and rates thereof;
(iii) Overtime work sheets and bills/vouchers, if not included in the pay rolls;
(iv) Classification of direct and indirect labour, incentive wage-earners, and allocation and apportionment of wages and salaries between departments/ cost-centres/capital works; and
(v) Statements of reconciliation between:
(a) Total attendance in conjunction with leave and absenteeism and attendance paid for;
(b) Total piece-work payments and accepted piece-work output in various operations multiplied by the authorised rates; and
(c) Total salaries and wages as per profit and loss account and that as per the totals of cost centre-wise distribution.
Cost Account Record Rules: Basic # 3. Utilities:
(a) Utilities are variously classified as Water, Steam, Motive power, Refrigeration, Humidification, Compressed air, Nitrogen gas, Oxygen gas, etc. Water may be Treated water, Demineralized water, Chilled water, etc. While Motive power may be generated, purchased, or both, Steam is normally generated in the Boilers of a company.
Again, the production of Steam is to be shown at different pressures (low/medium/high) but the same should be converted into an equated quantity in terms of one pressure for computation of steam cost and allocated to the user departments.
(b) The records for utilities shall include:
(i) For Power—Bill for power purchased, cost statement in Annexure for power generation/distribution with the attendant costs for fuels, etc.;
(ii) For Steam—Cost statement in Annexure for steam generation/distribution with attendant cost for water and fuels etc., Bills for purchases of coal, fuel oil, etc.;
(iii) For Water—Bill for water purchased (e.g. water royalty), allocated costs of raw water sources, bills for purchases of chemicals necessary for treatment/demineralization/cooling/chilling, etc., cost statement in Annexure with attendant costs; and
(iv) Work sheets and certified technical estimates of cost centre-wise consumption of power, steam, water, or other utilities as outlined at (a) above.
Cost Account Record Rules: Basic # 4. Depreciation:
The records for depreciation shall include:
(i) Fixed assets register indicating cost centre-wise gross block, depreciation so far and net block; and
(ii) Statements of depreciation computation and its allocation to different departments and cost centres.
Cost Account Record Rules: Basic # 5. Effluent Treatment:
The records for effluent treatment shall include:
(i) Bills of outside agencies engaged for treatment of effluents, whether solid, liquid and gaseous;
(ii) Inspection charges by the Pollution Control Board; and
(iii) Bills for expenses specifically incurred on various measures to control pollution of air, water, etc.
Cost Account Record Rules: Basic # 6. Physical Determinants:
The operating data to be given in respect of the following are mostly identical:
Installed capacity, No. of units generated, capacity utilisation percentage, No. of units purchased, consumption in Power House, other losses, Net units consumed, and Loss percentage to total power generated and purchased.
(ii) Water (all types):
Installed capacity, Production, Purchase, Consumption, Transit losses, Capacity utilisation and loss percentage to total of production and purchase.
Installed capacity, Production (High/Medium/Low pressure) Transit loss and Capacity utilisation.
(iv) Self-manufactured materials or Chemicals or Components:
Installed/Licensed capacity, Production, Batch size, No. of batches charged/produced/lost Capacity utilisation. Gross inputs, Gross outputs and Yield percentages (actual and standard) in the cost proforma.
(v) Production of ‘Products’ under reference:
Same as in (iv) above, Recoveries (if any) and Net inputs (major items) in the cost proforma.
(vi) Sales of ‘Products’ under reference:
Type, Grade or Size or Variety, Type of packing, Quantity produced, Quantity used for captive consumption, Quantity packed, Quantity sold, etc. in the cost proforma.
Cost Account Record Rules: Basic # 7. Determinants of Costs:
(i) Annexure (Schedule I):
The cost data to be given in a vertical fashion under the different heads and sub-heads of expense accounts, the manner of presentation and collation and also the format for tabulation in respect of quantity, rate, amount, per unit cost (current year and previous year) in horizontal fashion are same and mostly identical in the case of all Utilities (e.g. water, power, steam, etc.) in the relevant Annexures.
The guidance notes’ under each of these Annexures relating to treatment and ascertainment of costs and values, allocation bases, credits for recoveries, etc. are also same and identical.
(ii) Proforma (Schedule II):
The particulars of all items and heads/sub-heads and the manner of presentation, collation and tabulation and also the format, both horizontally and vertically, are more or less same and identical for each of the following proformae:
(a) Cost of production of self-manufactured ingredients/substance/materials/chemicals, etc. used in the manufacture of the ‘products’.
(b) Cost of production of the ‘products’.
(c) Cost of sales of the ‘products’ (packed or unpacked) produced and sold/consumed.
(d) Value of work-in-progress and finished stock.
(e) Summary of sales cost of sales, sales realisation and margin.
(f) Allocation of total expenses incurred and income received by the company as per financial accounts between the ‘products’ covered and other activities (and utilities)
(g) Allocation/apportionment of total expenses/income of the company between the ‘products’ covered and other activities.
(h) Reasons for loss of production.
(i) Summary of cost of production, cost of sales, sales realisation and margin obtained per unit.
The guidance ‘notes’ appended under each Proforma are also same and identical.