Applicability of Cost Audit & Cost Records Maintenance
Maintenance of Cost records:
Applicability:
Every company including a foreign company engaged in the production of goods or providing services specified in the Tables -A & B of rule 3, having an overall turnover from all its products and services of Rs 35 crores or more during the immediately preceding financial year shall include cost records for such products and services in their books of accounts maintained. Table – A (Regulatory sectors) & B (Non-Regulatory Sectors) are given at the bottom for reference
Format of Cost records:
Pursuant to the rule 5(1) it is stated that the cost records shall be maintained in the forms specified in CRA-1. These are the specific principles as to the different cost elements such as
- Material Cost, (2) Employee Cost, (3) Utilities, (4) Direct Expenses, (5) Repair and Maintenance, (6) Fixed Assets and Depreciation, (7) Overheads, (8) Administrative Overheads, (9) Transportation Cost, (10) Royalty and Technical Know-how, (11) Research and Development expenses, (12) Quality Control Expenses, (13) Pollution Control Expenses,(14) Service Department Expenses, (15) Packing Expenses, (16) Interest and Financing Charges, (17) Any other item of Cost, (18) Capacity Determination, (19) Work-in-progress and finished stock, (20) Captive Consumption, (21) By-Products and Joint Products, (22) Adjustment of Cost Variances, (23) Reconciliation of Cost and Financial Accounts, (24) Related Party Transactions, (25) Expenses or Incentives on Exports, (26) Production records, (27) Sales records, (28) Cost Statements, (29) Statistical Records, (30) Records of Physical Verification.
These are primarily focused on giving a true and fair view of cost of production and cost of sales and different overheads incurred. 2. Download From CRA 1 here
Exception from Maintenance of cost records:
Foreign companies having only liaison offices in India and are engaged in production, import, and supply or trading of medical devices listed in Sl.no 33 of Table-B are not required to maintain these records,a company that is classified as a micro-enterprise or a small enterprise including as per the turnover criteria under sub-section (9) of section 7 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006) is exempted from the applicability of cost records.
Cost audit under Companies act 2013:
Applicability: As per Rule-4,
Every company specified in Table – A of rule 3 shall get its cost records audited in accordance with these rules if the overall annual turnover of the company from all its products and services during the immediately preceding financial year is Rs 50 crores 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 under rule 3 is Rs 25 crores or more.Every company specified in Table – B of rule 3 shall get its cost records audited in accordance with these rules if the overall annual turnover of the company from all its products and services during the immediately preceding financial year is Rs 100 crores 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 under rule 3 is RS 35 crores or more.
Exception from Cost Audit: Cost audit is not applicable to a company Or
Table A – Regulatory sectors:
Table – B (Non regulatory Sectors):
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