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Companies (cost records and audit) Rules,2014 - F. No. 1/40/2013/CL-V - Companies Law

Extract

..... e context otherwise requires - (a) “Act” means the Companies Act, 2013 (18 of 2013); (b) “Cost Accountant in practice” means a cost accountant as defined in clause (b) of subsection (1) of section 2 of the Cost and Works Accountants Act, 1959 (23 of 1959), who holds a valid certificate of practice under sub-section (1) of section 6 of that Act and who is deemed to be in practice under sub-section (2) of section 2 thereof, and includes a firm or limited liability partnership of cost accountants; (c) “cost auditor” means a Cost Accountant in practice, as defined in clause (b), who is appointed by the Board; (d) “cost audit report” means the report duly audited and signed by the cost auditor including attachment, annexure, qualifications or observations etc. to cost audit report; (e) “cost records” means books of account relating to utilisation of materials, labour and other items of cost as applicable to the production of goods or provision of services as provided in section 148 of the Act and these rules; (f) “form” means a form annexed to these rules; (g) “institute” means the Institute of Cost Acco .....

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Companies (cost records and audit) Rules,2014 - F. No. 1/40/2013/CL-V - Companies Law

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..... regulated by the Airports Economic Regulatory Authority under the Airports Economic Regulatory Authority of India Act, 2008 (27 of 2008); (iii) Telecommunication services made available to users by means of any transmission or reception of signs, signals, writing, images and sounds or intelligence of any nature (other than broadcasting services) and regulated by the Telecom Regulatory Authority of India under the Telecom Regulatory Authority of India Act, 1997 (24 of 1997); (iv) Generation, transmission, distribution and supply of electricity regulated by the relevant regulatory body or authority under the Electricity Act, 2003 (36 of 2003), other than for captive generation (as defined under the Electricity Rules 2005); (v) Steel; (vi) Roads and other infrastructure projects; (vii) Drugs and Pharmaceuticals; (viii) Fertilisers; (ix) Sugar and industrial alcohol; (x) Petroleum products regulated by the Petroleum and Natural Gas Regulatory Board under the Petroleum and Natural Gas Regulatory Board Act, 2006(19 of 2006); (xi) Rubber and allied products being regulated by the Rubber Board. (b) For the purposes of clause (B), the thresholds limit shall be as under, - (i) in the case o .....

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Companies (cost records and audit) Rules,2014 - F. No. 1/40/2013/CL-V - Companies Law

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..... ii) Catheters; (iv) Intra Ocular Lenses; (v) Bone Cements; (vi) Heart Valves; (vii) Orthopaedic Implants; (viii) Internal Prosthetic Replacements; (ix) Scalp Vein Set; (x) Deep Brain Stimulator; (xi) Ventricular peripheral Shud; (xii) Spinal Implants; (xiii) Automatic Impalpable Cardiac Deflobillator; (xiv)Pacemaker (temporary and permanent); (xv) patent ductus arteriosus, atrial septal defect and ventricular septal defect closure device; (xvi) Cardiac Re-synchronize Therapy ; (xvii) Urethra Spinicture Devices; (xviii) Sling male or female; (xix) Prostate occlusion device; and (xx) Urethral Stents. (b) For the purposes of clause (D), the thresholds limit shall be as under, - (i) in the case of a company engaged in multiple products, any product or device for which the individual turnover (from such specific product or device) is rupees ten crore or more, or one third of the turnover, whichever is less. (ii) in the case of a company engaged in one specific product or device, if it has net worth of rupees one hundred and fifty crore or more or the turnover is rupees twenty five crores or more; 4. Applicability for cost audit.- (1) Every company engaged in a strategic industry and cov .....

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Companies (cost records and audit) Rules,2014 - F. No. 1/40/2013/CL-V - Companies Law

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..... um economies in utilisation of resources and these records shall also provide necessary data which is required to be furnished under these rules. 6. Cost audit.- (1) The category of companies specified in rule 3 and the thresholds limits laid down in rule 4, shall within one hundred and eighty days of the commencement of every financial year, appoint a cost auditor. (2) Every company referred to in sub-rule (1) shall inform the cost auditor concerned of his or its appointment as such and file a notice of such appointment with the Central Government within a period of thirty days of the Board meeting in which such appointment is made or within a period of one hundred and eighty days of the commencement of the financial year, whichever is earlier, through electronic mode, in form CRA-2, alongwith the fee as specified in Companies (Registration Offices and Fees) Rules, 2014. (3) Every cost auditor appointed as such shall continue in such capacity till the expiry of one hundred and eighty days from the closure of the financial year or till he submits the cost audit report, for the financial year for which he has been appointed. (4) Every cost auditor, who conducts an audit of the cost .....

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Companies (cost records and audit) Rules,2014 - F. No. 1/40/2013/CL-V - Companies Law

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..... ities allowed, actual quantities imported, actual quantities consumed, quantities in stock and quantities yet to be imported out of total licensed quantities. If both indigenous and imported materials/services are consumed, the records showing details of percentage mix of the same have to be maintained for each item. (2) Proper records shall be maintained separately showing the receipts, issues and balances both in quantities and cost of each item of intermediate material/service, process material, additives, bought out components, sub-assemblies, accessories, semi-finished go ods, consumable stores, spares, other indirect materials/services etc. used in the production of the goods/rendering of services under reference. The cost shall include all direct charges upto works/services delivered. In case of additives, bought out components/bought out services, sub-assemblies, accessories, semi-finished goods, consumable stores, spares and other indirect materials/services, proper records shall be maintained for the value and quantity issued/rendered in a financial year suitably adjusted for consumption. If the life of any input material/service is more than one financial year, necessary .....

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Companies (cost records and audit) Rules,2014 - F. No. 1/40/2013/CL-V - Companies Law

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..... ered. (7) The cost of consumable stores, small tools and machinery spares shall be charged to the relevant cost center/service centre or department or production process of goods or rendering of services on the basis of actual issues. In the case of consumable stores and small tools, indirect services, the cost of which are insignificant (less than 5% of the cost of material consumed), the company may, if it so desires, maintain such records for the group of such consumable stores, tools and indirect services. (8) Proper records shall be maintained showing the quantity and value of wastage, spoilage, rejections and losses of raw materials/input services, intermediates, process materials/services, consumable stores, small tools and machinery spares, whether in transit, storage, manufacture or at any other stage. The method followed for adjusting the above losses as well as the income derived from the disposal of rejected and waste materials/services including spoilage, if any, in determining the cost of good(s)/service(s), shall be indicated in the cost records. Any abnormal wastage or spoilage or rejection or losses shall be indicated distinctly and separately along with reasons th .....

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Companies (cost records and audit) Rules,2014 - F. No. 1/40/2013/CL-V - Companies Law

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..... it is not possible to identify them with any specific cost centre/service centre or department, the employees cost shall be apportioned to the cost centre/service centres or departments on equitable and reasonable basis and applied consistently. (3) The idle labour cost shall be separately recorded under classified headings indicating the reasons therefor. The method followed for accounting of idle time payments shall be disclosed in the cost records. (4) Any wages and salaries allocable to capital works, such as, additions to plant and machinery, buildings or other fixed assets shall be accounted for under the relevant capital heads. The method followed for accounting of such payments in determining the cost of the goods/services under reference shall be on equitable and reasonable basis and applied consistently. The said method shall be disclosed in the cost records also. (5) The cost of normal retirement benefits payable to employees shall be recorded separately and charged to cost. The method followed for accounting of such costs in determining the cost of the goods/services under reference shall be on equitable and reasonable basis and applied consistently and disclosed separ .....

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Companies (cost records and audit) Rules,2014 - F. No. 1/40/2013/CL-V - Companies Law

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..... e other goods/services shall be on equitable and reasonable basis and applied consistently. The said basis shall be disclosed in the cost records also. Proper records shall be maintained to indicate cost of purchase, production, distribution, marketing and price of services with reference to sales to outside parties. Proper records shall also be maintained regarding cost of services received from/rendered to related parties and cost of service cost centre incurred in foreign exchange besides proper maintenance of records in respect of any subsidy, grants, incentives, credits/recoveries, any abnormal cost, penalty and damages. 5. REPAIRS AND MAINTENANCE: (1) Proper records showing the expenditure incurred by the workshop, tool room and on repairs and maintenance in the various cost centres or departments shall be maintained under different heads. The records shall also indicate the basis of charging such expenses to different cost centres or departments. Records in respect of repairs and maintenance cost of jobs done in-house and outsourced, cost of major overhauls, repair and maintenance paid/payable to the related party, incurred in foreign exchange and any subsidy, grant, incenti .....

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Companies (cost records and audit) Rules,2014 - F. No. 1/40/2013/CL-V - Companies Law

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..... ndicated clearly in the cost records. The cost records shall also show the effect of such excess or lower depreciation, as the case may be, on per unit cost of each good/service. The cumulative depreciation charged in the cost records, against any individual item of asset shall not, however, exceed the original cost of the respective asset. (4) Proper records shall be maintained giving details of assets taken or given on lease. The breakup of lease rental in terms of financial charges, depreciation etc. paid or received shall be maintained separately. The details shall be maintained separately for assets taken from or given to related party. 7. OVERHEADS: (1) Proper records shall be maintained for various items of indirect expenses comprising overheads pertaining to goods/services under reference. These expenses shall be analyzed, classified and grouped according to functions, namely, works, administration, selling and distribution, Head Office expenses. (2) Proper records shall be maintained in respect of overheads incurred in foreign exchange, any subsidy, grant, incentive, credits/recoveries, unabsorbed overheads and any abnormal portion and also relating to resources received f .....

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Companies (cost records and audit) Rules,2014 - F. No. 1/40/2013/CL-V - Companies Law

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..... ction of goods/services under reference and to other goods/services shall be indicated in the cost records. Where the utility of research and development work extends to over more than one financial year, such expenses shall be charged to the cost of goods/services under reference and to all other goods/services on equitable and reasonable basis and applied consistently indicating the criteria on the basis of which it has been decided to extend the utility period of these expenses to more than one financial year. (3) Proper records shall be maintained in respect of such expenses incurred in foreign exchange and any subsidy, grant, incentive, credits/recoveries, penalty or damages paid and any abnormal portion and also for resources received from or supplied to any related party. (4) The expenses incurred by the research and development department for providing technical know-how to outsiders shall be recorded separately and excluded from the cost of goods/services under reference. The amount recovered for providing technical know-how to outsiders shall also be indicated separately and excluded from the income arising from the sale of goods/services under reference. 10. QUALITY CONT .....

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Companies (cost records and audit) Rules,2014 - F. No. 1/40/2013/CL-V - Companies Law

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..... products/services shall be apportioned to joint products/services on reasonable and equitable basis and shall be applied consistently. The basis on which such joint costs are apportioned to different products/services arising from the process shall be indicated in the cost records. Proper records shall be maintained in respect credits/recoveries from the disposal of joint products/services. 15. PACKING EXPENSES: Proper records shall be maintained separately for domestic and export packing showing the quantity and cost of various packing materials and other expenses incurred on primary and/or secondary packing indicating the basis of valuation. Where such expenses are incurred in common for other goods also, the basis of apportioning the expenses between the relevant goods shall be on equitable and reasonable basis and applied consistently. Proper records shall be maintained in respect of packing materials received from or supplied to the related party, costs incurred in foreign exchange and any subsidy, grant, incentive, credits/recoveries, unabsorbed overheads, penalty and damages, any abnormal portion etc. 16. INTEREST AND OTHER BORROWING COSTS: (1) Proper records shall be maint .....

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Companies (cost records and audit) Rules,2014 - F. No. 1/40/2013/CL-V - Companies Law

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..... s, penalty and damages paid and any amount received/receivable from pollution control agency. 19. PRODUCTION RECORDS: Quantitative records of all finished goods (packed or unpacked)/services rendered showing production, issues for sales and balances of different type of the goods/services under reference, shall be maintained. The quantitative details of production of goods/services rendered shall be maintained separately for self-produced, third party on job work, loan license basis etc. 20. SALES RECORDS: Separate details of sales shall be maintained for domestic sales at control price, domestic sales at market price, export sales under advance license, export sales under other obligations, export sales at market price, and sales to related party/inter unit transfer. In case of services details of domestic delivery/sales at control price, domestic delivery/sales at market price, export delivery/sales under advance license, export delivery/sales under other obligations, export delivery/sales at market price, and delivery/sales to related party/inter unit transfer. Such details shall be maintained separately for each plant/unit wise or service centre wise for total as well as per un .....

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Companies (cost records and audit) Rules,2014 - F. No. 1/40/2013/CL-V - Companies Law

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..... nt/information considered necessary for suitable presentation of Costs and Profitability of goods/services produced by the Company shall also be prepared. 24. RECONCILIATION OF COST AND FINANCIAL ACCOUNTS: (1) The cost statements shall be reconciled with the financial statements for the financial year specifically indicating the expenses or incomes not considered in the cost records or statements so as to ensure accuracy and to adjust the profit of the goods/services under reference with the overall profit of the company. The variations, if any, shall be clearly indicated and explained. (2) A statement showing the total expenses incurred and income received by the company under different heads of accounts and the share applicable to other goods/services and the goods/services under reference shall be prepared and reconciled with the financial statement. 25. STATISTICAL RECORDS: (1) The records regarding available machine hours or direct labour hours in different production departments and actually utilized shall be maintained for production of goods/rendering of services under reference and shortfall suitably analyzed. Suitable records for computation of idle time of machines and/o .....

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Companies (cost records and audit) Rules,2014 - F. No. 1/40/2013/CL-V - Companies Law

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