Cost Records
Cost records are the books, statements and annexures a company must maintain so its cost statements can be audited. The exam tests trigger thresholds, prescribed forms and retention - not definitions.
Statutory anchor
Section 148(1) of the Companies Act, 2013 requires cost records for prescribed goods or services; the Companies (Cost Records and Audit) Rules, 2014 supply the detail. Rule 3 covers maintenance of records; Rule 4 covers cost audit. Records and audit carry different thresholds, so a company may need records without needing an audit.
Thresholds to memorise
- Regulated sectors (Table A: telecom, electricity, petroleum, sugar, cement, fertiliser, etc.): records where overall turnover ≥ ₹35 crore and turnover of the individual product or service ≥ ₹10 crore.
- Non-regulated sectors (Table B): records where overall turnover ≥ ₹100 crore and individual product turnover ≥ ₹35 crore.
- Audit: regulated - overall turnover ≥ ₹50 crore and product ≥ ₹25 crore; non-regulated - product turnover ≥ ₹35 crore.
What CRA-1 requires
Rule 6 prescribes Form CRA-1: general information, product details, capacity, process flow, cost allocation bases, and reconciliation of cost records with financial accounts. Records are retained for eight financial years.
Worked example
Overall turnover ₹120 crore: cement ₹12 crore (regulated) and speciality chemicals ₹40 crore (non-regulated). Records: cement qualifies (overall ≥35, product ≥10); chemicals qualify (overall ≥100, product ≥35). Audit: cement fails the ₹25 crore product test, chemicals pass the ₹35 crore test. Records for both, audit for chemicals only.
Traps
- Confusing record thresholds with audit thresholds.
- Testing only product turnover when the rule also requires overall turnover.
- Omitting the reconciliation of cost records with audited accounts.