Cost Accounting Standards (CAS) are issued by the Council of The Institute of Cost Accountants of India on the recommendation of its Cost Accounting Standards Board. Companies covered by the Companies (Cost Records and Audit) Rules, 2014 must follow them when maintaining cost records, and cost auditors report on compliance with them.
Outside the statutory requirement, the standards are a useful reference for any business designing a costing system, because they define cost elements consistently.
The standards
| CAS | Subject |
|---|---|
| 1 | Classification of Cost |
| 2 | Capacity Determination |
| 3 | Production and Operation Overheads |
| 4 | Cost of Production for Captive Consumption |
| 5 | Average (Equalised) Cost of Transportation |
| 6 | Material Cost |
| 7 | Employee Cost |
| 8 | Cost of Utilities |
| 9 | Packing Material Cost |
| 10 | Direct Expenses |
| 11 | Administrative Overheads |
| 12 | Repairs and Maintenance Cost |
| 13 | Cost of Service Cost Centre |
| 14 | Pollution Control Cost |
| 15 | Selling and Distribution Overheads |
| 16 | Depreciation and Amortisation |
| 17 | Interest and Financing Charges |
| 18 | Research and Development Costs |
| 19 | Joint Costs |
| 20 | Royalty and Technical Know-how Fee |
| 21 | Quality Control |
| 22 | Manufacturing Cost |
| 23 | Overburden Removal Cost |
| 24 | Treatment of Revenue in Cost Statements |
How they fit together
- CAS 1 sets the vocabulary: cost by element (material, employee, expenses), by function (production, administration, selling), by behaviour (fixed, variable, semi-variable) and by traceability (direct, indirect).
- CAS 2 decides the capacity on which overheads are absorbed. Fixed overheads relating to unused capacity are not loaded onto product cost; they are treated as abnormal.
- CAS 6, 7, 8, 9 and 10 measure the direct cost elements.
- CAS 3, 11, 13 and 15 deal with overheads and service departments.
- CAS 4 is used where goods are transferred for captive consumption. Its use for GST valuation of such transfers is a separate question and depends on the GST valuation rules.
- CAS 22 brings these together into the cost of manufacture.
Practical points
- The standards prescribe measurement principles, not formats. Formats come from Form CRA-1 and management needs.
- Abnormal costs — idle capacity, abnormal wastage, penalties — are excluded from product cost under the relevant standards and are shown separately.
- Each standard carries a disclosure requirement. Cost statements should state the basis used, for example the capacity measure under CAS 2.
Official sources
Disclaimer. This article explains the law as understood on the review date shown above. It is general information, not advice on any particular case. Provisions may have changed since; refer to the official sources and obtain professional advice before acting. Full disclaimer.