A company covered by Rule 3 of the Companies (Cost Records and Audit) Rules, 2014 must maintain cost records for each covered product or service. Rule 5 says how: in Form CRA-1, on a regular basis, in a way that allows the cost of each product or service to be calculated for each period.
What Form CRA-1 asks for
CRA-1 is a list of the particulars the records must contain, not a fixed set of statements. The main elements are:
| Element | What the records should show |
|---|---|
| Material | Receipts, issues and consumption by product, valued per CAS-6; normal and abnormal losses |
| Employee cost | Wages and salaries by department and product, valued per CAS-7 |
| Utilities | Power, fuel, steam and water — generation or purchase cost and consumption per CAS-8 |
| Direct expenses | Expenses traceable to a product, per CAS-10 |
| Overheads | Production, administration and selling overheads with absorption bases (CAS-3, 11, 15) |
| Service cost centres | Cost of maintenance, quality control, laboratories and their apportionment (CAS-13) |
| Depreciation, interest, R&D | Treatment per CAS-16, 17 and 18 |
| Capacity | Installed and normal capacity, actual utilisation (CAS-2) |
| Joint and by-products | Basis of apportionment and realisation (CAS-19) |
| Reconciliation | Reconciliation of cost and financial profit |
The records must be kept for at least eight years and be capable of audit.
Records versus statements
A common difficulty is treating CRA-1 as a year-end exercise. The rule requires records maintained on a regular basis. In practice that means:
- consumption, production and cost data captured monthly from the ERP;
- cost centre and product codes built into the chart of accounts;
- monthly or quarterly cost sheets that roll up to the annual cost statement.
Records prepared only at year-end are harder to support and usually show unexplained differences from the books.
The Board’s report
Under rule 8(5)(ix) of the Companies (Accounts) Rules, 2014, the Board’s report must state whether the company is required to maintain cost records under section 148(1) and whether such records are made and maintained.
A practical checklist
- Confirm which products are covered, by CETA heading, and the turnover test.
- Map ledger accounts to cost elements and cost centres.
- Fix the capacity measure for each plant or line.
- Define absorption bases for each overhead pool.
- Prepare monthly cost sheets and reconcile them with the books.
- Keep working papers for abnormal items, which are excluded from product cost.
Official sources
- Ministry of Corporate Affairs — Companies (Cost Records and Audit) Rules, 2014
- The Institute of Cost Accountants of India — Cost Accounting Standards