WBCHSE Costing & Taxation flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Prime cost

The sum of direct material cost, direct labour cost and direct expenses. It is the first major total in a cost sheet and excludes all indirect costs.

Cost centre

A location, person or item of equipment for which costs are collected and apportioned. It may be a production or a service cost centre.

Opportunity cost

The benefit forgone by choosing one alternative over the next best alternative. It is relevant to decision-making but is not recorded in the books of account.

Semi-variable cost

A cost containing both a fixed and a variable element, such as electricity charges with a fixed minimum plus a charge per unit consumed. It is split using the high-low method.

Re-order level

Maximum consumption multiplied by maximum re-order period. Stock is replenished when the level is reached so that normal demand is met during lead time.

Economic order quantity

The order size at which total ordering cost equals total carrying cost, minimising the combined cost. It equals the square root of twice annual consumption times order cost divided by carrying cost per unit.

FIFO method

First-in, first-out issue pricing: the oldest stock is issued first, so closing stock is valued at the most recent purchase prices. It is suitable when prices are falling.

Bin card

A store record showing quantities received, issued and in hand for each material. It records quantity only and is kept in the stores department.

Halsey plan

An incentive scheme paying time-rate wages plus a bonus of fifty per cent of the time saved multiplied by the hourly rate. It guarantees the time wage for hours worked.

Rowan plan

An incentive scheme where bonus equals time saved divided by standard time, multiplied by time taken and by the rate. Earnings never exceed twice the time wage.

Labour turnover rate

The number of separations during a period divided by the average number of workers, expressed as a percentage. It measures labour stability and the cost of replacing workers.

Idle time

Hours paid but not worked. Normal idle time is absorbed into the labour rate; abnormal idle time is charged to the costing profit and loss account.

Overhead absorption rate

Budgeted overhead divided by the budgeted absorption base, such as labour hours or machine hours. It is used to charge overhead to cost units.

Under-absorption of overhead

The amount by which overhead absorbed falls short of actual overhead incurred. It arises when actual activity or spending differs from the budget and is written off or apportioned.

Reciprocal apportionment

A method of redistributing service department costs when service departments serve each other as well as production departments. It uses simultaneous equations or repeated distribution.

Machine hour rate

Total overhead attributable to a machine divided by its productive machine hours. It is the preferred absorption base in machine-intensive departments.

Cost of goods sold

Factory or works cost plus opening finished goods stock minus closing finished goods stock. It represents the cost of units actually sold during the period.

Cost of sales

Cost of goods sold plus administration, selling and distribution overheads. Sales minus cost of sales gives the profit shown in a cost sheet.

Notional profit

In contract costing, the value of work certified plus cost of work uncertified minus cost incurred to date. Only a prudent portion is transferred to profit.

Equivalent production

Physical units multiplied by the percentage of completion, used in process costing to spread cost between completed output and closing work-in-progress.

Service costing

A method used by service organisations where total cost is divided by composite cost units such as passenger-kilometre, tonne-kilometre or patient-day.

Notional charges

Costs recorded only in cost accounts, such as notional rent or interest on capital. They are deducted from cost profit when reconciling to financial profit.

Reconciliation statement

A memorandum statement starting from profit as per one set of accounts and adjusting items recorded only in the other, to arrive at the profit per the other set.

Previous year

The financial year in which income is earned. It immediately precedes the assessment year in which that income is assessed and taxed.

Resident but not ordinarily resident

An individual who satisfies a basic condition but fails one or both additional conditions. Foreign income is taxed only if from a business controlled in India.

Head of income

One of five categories into which income is classified for computation: salaries, house property, business or profession, capital gains, and other sources. Each has its own computation rules.

Gross total income

The sum of income under the five heads after setting off intra-head and inter-head losses. Deductions under Chapter VI-A are then subtracted to reach total income.

Section 87A rebate

A rebate reducing the tax payable of a resident individual whose total income does not exceed the prescribed threshold. It cannot exceed the tax otherwise payable.

Advance tax

Tax paid in instalments during the previous year when the estimated liability after TDS reaches the prescribed threshold. Shortfalls attract interest under Sections 234B and 234C.

Health and education cess

A four per cent charge levied on the amount of income tax plus surcharge. It is added to arrive at the final tax liability of the assessee.

Surcharge

An additional charge on income tax imposed when total income exceeds prescribed high thresholds. Rates differ between the old and new tax regimes.

Deduction under Section 80C

A deduction from gross total income for specified investments and payments such as provident fund, life insurance premium and tuition fees, capped at the prescribed limit.