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    Maintenance of Cost Records

    • Maintenance of cost accounting records and cost audit as per sec-148 of the Companies Act, 2013 governed by the Companies (Cost Records and Audit) Rules, 2014 along with Amendment Rules, 2014


    • The Rules classified the Sectors / Industries into Regulated and Non Regulated



    Sectors / Industries
















    • Applicability of maintenance of Cost Records:


    1. Cost Records means ‘books of account relating to utilization 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’.
    2. There cannot be any exhaustive list of cost records.
    3. Any transaction that has a effect on the cost of product / service shall forms part of the cost accounting records


    1. Cost records shall be maintained in such a manner to make it possible to calculate cost of production / operations per unit, cost of sales per unit and margin for each of its product.


    1. Every Company, including foreign company, whose turnover from all of its products and services having 35 crores or more during the previous financial year engaged in the production of goods or rendering the services shall maintain cost records


    vException: The following companies are exempted from maintaining cost records:


    üForeignCompanies having only one liaison office in India and engaged in the production, import

    and supply or trading of medical are exempted

    üCompanies classified as micro enterprise or medium enterprise as per Micro, Small and Medium Development Act, 2006 are exempted









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    SBS Interns' Digest                                                                                                                


    vMeaning of Liaison


    üForeign companies can also start their Indian operations by setting up a liaison (representative) office in India. The role of liaison office is limited to collecting information about possible market opportunities in India and providing information about the parent company and its products to the prospective Indian customers. It acts as a communication channel between the parent company and Indian companies. Such Liaison office can be opened only with the prior approval of RBI.


    vDefinition of Turnover


    üForthepurposes of these Rules, “Turnover” means gross turnover made by the company from the sale or supply of all products or services during the financial year. It includes any turnover from job work or loan license operations but exclude duties and taxes. Export benefit received should be treated as a part of sales.


    • Applicability of Cost Audit


    1. Every Company specified under Regulated Sector / Industry whose overall annual turnover during the immediately previous financial year exceeds 50 crores and turnover of each individual product /service exceeds 25 crores


    1. Every company specified under Non Regulated Sector / Industry whose overall annual turnover during the immediately previous financial year exceeds 100 crores and turnover of each individual product /service exceeds 35 crores




    Cost Audit shall not be applicable in following cases


    üIncasethe company earns revenue from exports in foreign currency exceeds 75% of its total revenue; or


    üThecompany is operating from Special Economic Zone(SEZ)


    • Maintenance of Cost Records


    1. Cost Records to be maintained in Form CRA-1


    1. There is no prescribed format but provides the principles to be followed at the time of considering different cost elements.


    1. Maintenance of cost records are left open for the sectors / Industries, but they shall be in a manner to ascertain true and fair view of cost of production, cost of sales and margin of products / services


    1. In case of Multi Product Company, where all the products not covered under the rules, and even if the Turnover of the individual product/s that are covered under the Rules is less than threshold limit, but if the overall turnover of all the products exceeds the threshold limits, then maintenance of records shall be mandatory.


    1. Once the maintenance of Cost records becomes applicable, it shall be maintained on continuous basis in the subsequent years also


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    Maintenance of Cost Records



    SBS Interns' Digest                                                                                                                


    • Appointment of Cost Auditor


    1. Every Company to which cost audit applicable shall appoint the Cost Auditor within 180 days from the date of commencement of every financial year


    1. Company shall file a Notice of appointment of Cost Auditor

    üwithin30 days from the date of board meeting in which the Cost Auditor appointed; or üwithin180 days from the commencement of financial year; whichever is earlier


    1. Notice shall be filed in an electronic mode in Form CRA-2
    2. Appointed Cost Auditor shall continue till

    ütheexpiry of 180 days from the closure of financial year; or ühesubmits the cost audit report; whichever is earlier


    • Cost Audit Report


    1. Cost Audit Report shall be submitted by the Cost Auditor along with his/ her observations, recommendations, qualifications, if any, in Form CRA-3
    2. Submission of Report shall be done to the Board of Directors within 180 days from the closure of financial year to which the report relates


    Cost Audit Report shall be furnished to the Central Government within 30 days from the date of receipt of such report from the Cost Auditor, along with the explanation on every reservation / qualification reported by the Cost Auditor in Form CRA-4