ISC Accounts Cost Sheet

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rohit.agarwal@icai.org

rohit.agarwal@icai.org

Normal & Crash Courses for ISC,

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CBSE, BCom, BBA, CA & CS

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No Notete 33 Note 4 Note 4 *** *** Less: Purchase Returns

Less: Purchase Returns ******

Less: Abnormal Loss of Raw Materials

Less: Abnormal Loss of Raw Materials ******

Less: Closing stock of Raw Materials

Less: Closing stock of Raw Materials *** *** *** *** ******

Direct Wages (Productive Labour)

Direct Wages (Productive Labour) *** *** ******

Direct Expenses (Chargeable Expenses)

Direct Expenses (Chargeable Expenses) *** *** ******

Royalty

Royalty *** *** ******

*** ***

*** ***

Adjustment for WIP at Prime Cost: Adjustment for WIP at Prime Cost: Opening Stock of WIP

Opening Stock of WIP ******

Less: Closing Stock of WIP

Less: Closing Stock of WIP *** *** *** *** ******

PRIME COST

PRIME COST *** *** ******

Add : Factory Overheads: Add : Factory Overheads: Factory Rent, Power

Factory Rent, Power ******

Indirect Material Indirect Material ****** Indirect Wages Indirect Wages ****** Supervisor Salary Supervisor Salary ******

Factory Asset Depreciation

Factory Asset Depreciation ******

*** *** Less: Sale of Scrap

Less: Sale of Scrap *** *** *** *** ******

Adjustment for WIP at Manufacturing Cost: Adjustment for WIP at Manufacturing Cost: Opening Stock of WIP

Opening Stock of WIP ******

Less: Closing Stock of WIP

Less: Closing Stock of WIP *** *** *** *** ******

WORKS COST

WORKS COST *** *** ******

Add: Administration Overheads: Add: Administration Overheads: Office Rent

Office Rent ******

Office Asset Depreciation

Office Asset Depreciation ******

Audit Fees

Audit Fees ******

Bank Charges

Bank Charges ******

Other Office Expenses

Other Office Expenses *** *** *** *** ******

COST OF PRODUCTION

COST OF PRODUCTION *** *** ******

Adjustment for Stock of Finished Goods: Adjustment for Stock of Finished Goods: Opening stock of Finished Goods

Opening stock of Finished Goods ******

Less: Closing stock of Finished Goods ( Note 2)

Less: Closing stock of Finished Goods ( Note 2) *** *** *** *** --- ---COST OF GOODS SOLD

COST OF GOODS SOLD *** *** ******

Add: Selling and Distribution Overheads: Add: Selling and Distribution Overheads: Salesman Commission, salary, etc.

Salesman Commission, salary, etc. ******

Traveling Expenses Traveling Expenses ****** Advertisement Advertisement ****** Delivery-man expenses Delivery-man expenses ****** Sales Tax Sales Tax ****** Bad Debts Bad Debts *** *** *** *** ****** COST OF SALES COST OF SALES *** *** ****** PROFIT

PROFIT (balancing figure)(balancing figure) *** *** ******

SALES

Rohit Agarwal

Rohit Agarwal

Working Notes: Working Notes:

1.

1. Opening Stock + Units Produced = Units Sold + Closing Stock Opening Stock + Units Produced = Units Sold + Closing Stock  2.

2. Valuation of Closing Stock of Finished Goods:Valuation of Closing Stock of Finished Goods:





Value of Closing Stock of Finished Goods = Cost of Production X Units of Closing Stock  Value of Closing Stock of Finished Goods = Cost of Production X Units of Closing Stock 

Units Produced Units Produced





Closing Stock of Finished Goods Closing Stock of Finished Goods Opening

Opening Stock Stock of of Finished Finished Goods Goods Out Out of of Current Current ProductionProduction (

( Value Value Given Given in in Question) Question) Cost Cost of of Production Production X X UnitsUnits Units Produced Units Produced 3.

3. Cost per Unit for this part is to be calculated by dividing the Amounts in 2Cost per Unit for this part is to be calculated by dividing the Amounts in 2ndndcolumn bycolumn byUnitsUnits Produced 

Produced _..

4.

4. Cost per Unit for this part is to be calculated by dividing the Amounts in 2Cost per Unit for this part is to be calculated by dividing the Amounts in 2ndndcolumn bycolumn byUnits Sold Units Sold 

5.

5. Items not to be considered in Cost Sheet:Items not to be considered in Cost Sheet: (i)

(i) Income TaxIncome Tax (ii)

(ii) Cash DiscountCash Discount (iii)

(iii) Donations, DividendDonations, Dividend (iv)

(iv) Preliminary Expenses/ GoodwillPreliminary Expenses/ Goodwill written off.

written off. (v)

(v) Transfer to reserves.Transfer to reserves.

(vi)

(vi) InterestInterest (vii)

(vii) Rents receivable.Rents receivable. (viii)

(viii) Losses on the sales of investments,Losses on the sales of investments, building etc.

building etc. (ix)

(ix) Profits made on the sale of fixed assets.Profits made on the sale of fixed assets. (x)

(x) Transfer fee received.Transfer fee received.

Elements of Cost: Elements of Cost:

 Cost:Cost: Cost is measurement, in monetary terms, of the amount of resources used for the purpose of Cost is measurement, in monetary terms, of the amount of resources used for the purpose of  production of goods or rendering services. The amount of expenditure (actual or notional) incurred on production of goods or rendering services. The amount of expenditure (actual or notional) incurred on or attributable to a specified article, product or activity.

or attributable to a specified article, product or activity.

 Direct costs: Costs that are related to the cost object and can be traced in an economically feasible way.Direct costs:Costs that are related to the cost object and can be traced in an economically feasible way.

 Indirect costs: Costs that are related to the cost object but cannot be traced to it in an economicallyIndirect costs: Costs that are related to the cost object but cannot be traced to it in an economically feasible way.

feasible way.

 Cost objectCost object – Anything for which a separate measurement of cost is desired. Examples of cost objects– Anything for which a separate measurement of cost is desired. Examples of cost objects include a product, a service, a project, a customer, a brand category, an activity, a department, a include a product, a service, a project, a customer, a brand category, an activity, a department, a programme.

programme.

A diagram as given below shows the elements of cost described as under: A diagram as given below shows the elements of cost described as under:

ELEMENTS OF COST ELEMENTS OF COST MATERIALS

MATERIALS COST COST LABOUR LABOUR COST COST OTHER OTHER EXPENSESEXPENSES

DIRECT

DIRECT INDIRECT INDIRECT DIRECT DIRECT INDIRECT INDIRECT DIRECT DIRECT INDIRECTINDIRECT MATERIALS

MATERIALS MATERIALS MATERIALS LABOUR LABOUR LABOUR LABOUR EXPENSES EXPENSES EXPENSESEXPENSES COST

COST COST COST COST COST COSTCOST

OVERHEADS OVERHEADS

 Direct labour: Labour which can be economically identified or attributed wholly to a cost object isDirect labour: Labour which can be economically identified or attributed wholly to a cost object is called direct labour. For example, labour engaged on the actual production of the product or in carrying called direct labour. For example, labour engaged on the actual production of the product or in carrying out the necessary operations for converting the raw materials into finished product.

out the necessary operations for converting the raw materials into finished product.

 Direct expenses: It includes all expenses other than direct material or direct labour which are speciallyDirect expenses:It includes all expenses other than direct material or direct labour which are specially incurred for a particular cost object and can be identified in an economically feasible way.

incurred for a particular cost object and can be identified in an economically feasible way.

 Indirect materials: Materials which do not normally form part of the finished product (cost object) areIndirect materials:Materials which do not normally form part of the finished product (cost object) are known as indirect materials. These are: Stores used for maintaining machines and buildings (lubricants, known as indirect materials. These are: Stores used for maintaining machines and buildings (lubricants, cotton waste, bricks, Stores used by service departments like power house, boiler house, canteen etc. cotton waste, bricks, Stores used by service departments like power house, boiler house, canteen etc.

 Indirect labour : Labour costs which cannot be allocated but can be apportioned to or absorbed by costIndirect labour :Labour costs which cannot be allocated but can be apportioned to or absorbed by cost units or cost centres is known as indirect labour. Examples of indirect labour includes - charge hands units or cost centres is known as indirect labour. Examples of indirect labour includes - charge hands and supervisors; maintenance workers; etc.

and supervisors; maintenance workers; etc.

 Indirect expenses: Expenses other than direct expenses are known as indirect expenses. Factory rentIndirect expenses: Expenses other than direct expenses are known as indirect expenses. Factory rent and rates, insurance of plant and machinery, power, light, heating, repairing, telephone etc., are some and rates, insurance of plant and machinery, power, light, heating, repairing, telephone etc., are some examples of indirect expenses.

examples of indirect expenses.

 OverheadsOverheads: It is the aggregate of indirect material costs, indirect labour costs and indirect expenses.: It is the aggregate of indirect material costs, indirect labour costs and indirect expenses. The main groups into which overheads may be subdivided are the following :

The main groups into which overheads may be subdivided are the following : (i)

(i) Production or Works overheads:Production or Works overheads: Indirect expenses incurred in the factory and are incurred withIndirect expenses incurred in the factory and are incurred with the running of the factory.

the running of the factory. (ii)

(ii) Office & Administration Overhead:Office & Administration Overhead: Indirect expenses incurred in the direction, control andIndirect expenses incurred in the direction, control and administration of an undertaking.

administration of an undertaking. (iii)

(iii) Selling overhead:Selling overhead: Indirect expenses incurred in the soliciting and securing orders fromIndirect expenses incurred in the soliciting and securing orders from customers and of efforts to find and retain customers.

customers and of efforts to find and retain customers. (iv)

(iv) Distribution overhead:Distribution overhead: Indirect expenses incurred from the time the product is completed in theIndirect expenses incurred from the time the product is completed in the factory until it reaches its point of sale.

factory until it reaches its point of sale.

COST COST

DIRECT INDIRECT DIRECT INDIRECT MATERIAL

MATERIAL LABOUR LABOUR EXPENSES EXPENSES MATERIAL MATERIAL LABOUR LABOUR EXPENSESEXPENSES

PRIME

PRIME COST COST OVERHEADOVERHEAD FACTORY

FACTORY OFFICE OFFICE & & ADMINISTRATION ADMINISTRATION SELLING SELLING DISTRIBUTIONDISTRIBUTION OVERHEAD

OVERHEAD OVERHEAD OVERHEAD OVERHEAD OVERHEAD OVERHEADOVERHEAD COST

COST

 Cost Centre:Cost Centre: It is defined as a location, person or an item of equipment (or group of these) for whichIt is defined as a location, person or an item of equipment (or group of these) for which cost may be ascertained and used for the purpose of Cost Control. Cost Centres are of two types, viz., cost may be ascertained and used for the purpose of Cost Control. Cost Centres are of two types, viz., Personal and Impersonal. A Personal cost centre consists of a person or group of persons and an Personal and Impersonal. A Personal cost centre consists of a person or group of persons and an Impersonal cost centre consists of a location or an item of equipment (or group of these).

Impersonal cost centre consists of a location or an item of equipment (or group of these).

 Cost unit:Cost unit: It is a unit of product, service or time (or combination of these) in relation to which costsIt is a unit of product, service or time (or combination of these) in relation to which costs may be ascertained or expressed. We may for instance determine the cost per tonne of steel, per tonne may be ascertained or expressed. We may for instance determine the cost per tonne of steel, per tonne kilometre of a transport service or cost per machine hour. Sometime, a single order or a contract kilometre of a transport service or cost per machine hour. Sometime, a single order or a contract constitutes a cost unit.

constitutes a cost unit.

 Cost Accounting is defined as "the process of accounting for cost which begins with the recording of Cost Accounting is defined as "the process of accounting for cost which begins with the recording of  income and expenditure or the bases on which they are calculated and ends with the preparation of  income and expenditure or the bases on which they are calculated and ends with the preparation of  periodical statements and reports for ascertaining and controlling costs."

Rohit Agarwal

Rohit Agarwal

 Advantages of a Cost AccountingAdvantages of a Cost Accounting are listed as below :are listed as below : (i)

(i) A good Cost Accounting System helps in identifying unprofitable activities, losses orA good Cost Accounting System helps in identifying unprofitable activities, losses or inefficiencies in any form.

inefficiencies in any form. (ii)

(ii) The application of cost reduction techniques, operations research techniques and value analysisThe application of cost reduction techniques, operations research techniques and value analysis technique helps in achieving the objective of economy in concern’s operations. Continuous technique helps in achieving the objective of economy in concern’s operations. Continuous efforts are being made by the business organisation for finding new and improved methods for efforts are being made by the business organisation for finding new and improved methods for reducing costs.

reducing costs.

 Concept of cost sheetConcept of cost sheet

A cost sheet is a statement showing components of total cost of output of a particular product or service A cost sheet is a statement showing components of total cost of output of a particular product or service produced during a particular period. It is useful in the following ways:

produced during a particular period. It is useful in the following ways: (i)

(i) It helps us to know different components of total costs.It helps us to know different components of total costs. (ii)

(ii) It acts as a budgetary statement.It acts as a budgetary statement.

Concept of cost accounting and financial accounting Concept of cost accounting and financial accounting

Financial

Financial Accounting Accounting Cost Cost accountingaccounting The objective is to provide information about

The objective is to provide information about overall financial performance and financial overall financial performance and financial position of business.

position of business.

The objective is to ascertain cost, control cost and The objective is to ascertain cost, control cost and to provide information for decision making.

to provide information for decision making. It is kept by all types of concerns including trading

It is kept by all types of concerns including trading concerns.

concerns.

It is kept by businesses engaged either in It is kept by businesses engaged either in manufacturing or in rendering services.

manufacturing or in rendering services. It shows the profit or loss of the business as a

It shows the profit or loss of the business as a whole.

whole.

It shows the profit or loss of each product, job, It shows the profit or loss of each product, job, process or department.

process or department. Write answer of these questions in your

Write answer of these questions in your copy:copy: 1.

1. Distinguish between:Distinguish between: a.

a. Cost Centre & Cost UnitCost Centre & Cost Unit [[ ISC 2005 ISC 2005_]]

b.

b. Fixed Cost & Variable Cost.Fixed Cost & Variable Cost. c.

c. Cost Accounting & Financial AccountingCost Accounting & Financial Accounting d.

d. Chargeable Expenses & Overhead ExpensesChargeable Expenses & Overhead Expenses e.

e. Cost sheet & Profit & Loss Account.Cost sheet & Profit & Loss Account. f.

f. Prime Cost & Work Cost.Prime Cost & Work Cost. [[ ISC 1996  ISC 1996 _]]

g.

g. Primary packing material & Secondary packing materialPrimary packing material & Secondary packing material 2.

2. Mention two uses of cost sheet.Mention two uses of cost sheet. [[ ISC 1999 ISC 1999_]]

3.

3. How is material consumed calculated?How is material consumed calculated? [[ ISC 2000 ISC 2000_]]

4.

4. Define Costing.Define Costing. [[ ISC 2003 ISC 2003_]]

5.

5. How is stock of finished goods valued during the preparation of cost sheet?How is stock of finished goods valued during the preparation of cost sheet? [[ ISC 2002 ISC 2002_]]

6.

6. What is Work in Progress?What is Work in Progress? 7.

7. What is Production Supplies?What is Production Supplies? 8.

8. What is Consumable Stores?What is Consumable Stores? 9.

9. What is treatment of sale of scrap?What is treatment of sale of scrap? 10.

10. What is Direct Cost?What is Direct Cost? [[ ISC 1995 ISC 1995_]]

11.

11. Give two reasons why profits disclosed by cost sheet differ from those of financial accounts.Give two reasons why profits disclosed by cost sheet differ from those of financial accounts. [[ ISC 1998 ISC 1998_]]

12.

12. Mention the expenses not includible in Cost sheet.Mention the expenses not includible in Cost sheet. [[ ISC 2004 ISC 2004_]]

13.

13. What is Prime Cost?What is Prime Cost? [[ ISC 1993 ISC 1993_]]

14.

14. Name four Types of Direct Expenses.Name four Types of Direct Expenses. [[ ISC 2007  ISC 2007 _]]

15.