1. Costing – Cost Accounting Standards
Cma Ca Zitendra Rao
Member – SIRC of the ICAI
Hyderabad – India

2. Costing – Cost Sheet – Practical Issues
Our Journey ….
What is COSTING
Overview of Cost Accounting Standards
CAS 1 / CAS 3 / CAS 4 / CAS 5 / CAS 24
Introduction of Cost Sheets

3. COST
COST is defined as the resources consumed to accomplish a specified objective.
COST = what you give up …. Professor Allen
What next…..
Costs must be measured to ascertain Profit
Process of measuring the costs is Cost Accounting or Costing
What do you do…
Record, Summarize and Report Cost Information from transactions.
Drawing Segment wise or product wise data
Conclude whether the product is profitable

4. Costing – CAS 1 Scope Classifies the costs given in a statement
For proper presentation
Arrangement of costs in logical groups depending on Nature and Purpose
Terms
Cost Object
Cost elements.
Cost Centre
Cost Unit
Cost Classification takes into consideration the Managerial Objective
Classification
Nature of Expenses
Traceability to Cost Object
By Function
By nature of Behavior
By nature of Production or operation process
Presentation
Principle of Consistency
Test of Relevancy
Disclose the material changes

5. Costing – CAS 3
Scope
Classifies and measures the Production or Operational Overheads
For proper presentation
Indirect Costs involved in the production of a product or service
Recognition
Based on Invoice
Cost Incurred
Not to include abnormal costs / Notional costs / Fines / Penalties.
Subsidies or recoveries to be set off
Assignment is on
Traceability
Cause and Effect Principle
Benefits received
If Variable on actual production
If Fixed on Normal capacity
Presentation
Separate Line Item in a cost sheet
Material aspects to be disclosed separately
Disclosure as Foot note
Basis of assignment
Credit for recoveries
Abnormalities

6. Costing – CAS 4
Scope
Arriving at Assessable value for captive Consumption
Arriving at Cost of production is the Objective
Normal capacity - adjusted installed capacity with time lost on maintenance, normal shut down and time lost in batch changeover
Recognition
Direct Costs net of recoveries
Production Overheads
R&D and QC Costs and packing Costs
Inputs received free of cost
Assignment issues
Traceability
Abnormal and Non recurring costs taken out
Used for tax Compliance
If Variable on actual production
If Fixed on Normal capacity
Presentation
Separate Line Item driven cost sheet
Avoids under pricing
GST aspects
Basis of assignment
Credit for recoveries
Abnormalities

7. Costing – CAS 5 Scope Recognition Assignment issues Presentation
Methodology to collect the transportation costs
Arriving at Average Transportation costs
Freight subsidies / Insurance claims / valuation of Inventories
Recognition
Differentiation of Freight/Cartage/Insurance.
Vehicle Log Sheets – tasks accomplished
Consumables and spares
Purpose – Inward/Outward/Job worker
Penalties/ damages are no costs.
Assignment issues
Inward Costs to get added to Inputs
Outward Costs are Cost of sales
Traceability to varied goods/products on weight or volume basis
Presentation
Operating Cost Sheet in case of own Fleet
Amortization of battery – Tyres
Consignment specific costs in case of hired facility
A Combination of own and hired may also happen at times
Let us look at a Cost Sheet

8. Costing – CAS 24 Scope Recognition Assignment issues Presentation
Consistency in treatment of revenue in Cost statements
Covers those Revenue transactions that require presentation in the cost statement
Recognition
Net sales realization mean net of Discounts and IDT ( GST)
Other Income not to form part of Revenue
Revenue implies – sales Value
Other operating income is Revenue
Classify into Domestic/ Exports/Manufactured Goods/ Traded Goods /Services
Assignment issues
Realization from Scrap/waste/spoiled goods to be set off against COP
Revenue of shared services or utilities to be set off against the costs
By-Product sale should be recognized net of further processing costs
Product related Subsidies/incentives form part of revenue.
Expenditure related subsidy or grant not to form part of revenue – but to set off against the cost
Traceability to the product in specific
Presentation
Quantitative Data/grants
Related Party Sales

9. THANKS Cma Ca Zitendra Rao Member – SIRC of ICAI Hyderabad – India