Statement of Cost accounting
Theoretically, cost sheet and statement of cost are similar. Cost sheet is a component of the manufacturing factory, and its main objective is to present total cost or per unit cost by classifying every component of cost. Statement of cost is generally for the estimation of the cost of future production or for the determination of tender price, Statement of cost is prepared, just like the cost sheet, but it is not necessary to present or show the proportion or ratio of per unit cost or every component of cost in total cost. Thus, where a statement is prepared to show total cost and the profit and loss, but where it is not desired to find out cost per item of expense, the statement prepared is the statement of cost.
Defining statement of cost, ICWA states that,
“This is a statement which comprehensively presents partial or total results of any business, and which can be interim, periodical or final”.
Components of Total Cost
Total cost is calculated in cost sheet and statement of cost, the following costs are included in total cost-
(a) Prime cost- It is also known as main cost or primary cost. The expenses that come under it are as follows-
1.Material consumed
2.Direct labour.
3.Direct expenses
(2) Factory cost- It is also known as works cost or mill cost, In order to find out factory cost, various expenses of the factory are added. Some of main expenses of factory are as following –
1.Unproductive or indirect wages
2.Indirect material
3.Factory rent
4.Factory repairs
5.Depreciation of machinery f
6.Factory workers’ salary
7.Haulage
8.Drawing office salary
9.Factory rates
10.Research expenses
11.Factory insurance
12.Motive power
13.Other factory expenses
14.Water supply
(c) Office cost-This is also known as cost of produc tion. In order to find out office cost, various expenses of the office are added to the factory cost. The main expenses of the office are as follows-
1.General expenses
2.Office salaries
3.Legal expenses
4.Bank charges
5.Office rent
6.Depreciation on office building and furniture
7.Audit fees
8.Postage, telegram and telephone
9.Printing and Stationery S
10.Director’s fees
11.Other office expenses.
(d) Total Cost- This is also known as final cost. In order to find out total cost, selling and distribution expenses are added to office cost. The following are the main expenses related to selling and distribution
1.Advertising expenses
2.Packing expenses
3.Godown’s rent
4.Bad debts
5.Rent of showroom
6.Salesmen’s salary
7.Carriage outwards
8.Insurance of finished goods
9.Commission or Brokerage on sale of goods
10.Commission and travelling allowances of
salesmen
11.Depreciation on delivery van.
(d) Selling Price- This is that price at which manu-
factured goods are sold. An estimated amount of profit is added to the total cost of the goods in order to determine selling price.
Items that are not included in Cost Account
1800 Cost account is the accounting of the various expenses related to production, therefore, some expenses that are not directly related to production are not written in the accounts of cost account, they are only written in financial accounting. Some of these expenses are as follows-
1.Cash discount
2.Interest on debentures.
3.Profit or Loss on sale of fixed assets (vi)
4.Interest or dividend on-investment
5.Goods stolen or destroyed TOARE
6.Income Tax
7.Written off goodwill, preliminary expenses etc.
