M.com ll SEM ADV.

COST
ACCOUNTING
TREATMENT OF SPECIAL EXPENSES IN COST ACCOUNTING
1.Research and development cost
Post interest for developing a new product manufacturing process improvement accepting
product process platform,etc
This include one cost of raw material used in search
2. Salary and wages subscription to book and journal
3. Cost of test and trial run alphanumeric
4. Depreciation insurance repair maintenance etc.
5. Patent free travelling cost etc.
Treatment of search cost.
1.Basic research
Is the the discovery of new new idea and advancement of knowledge
2.Applied research
The applied research is finding current problem solution this includes expense for
improving existing.
It is factory overhead.

t​ reatment of development cost

Preliminary Expense
The expense Incurred by promoters.
This Expense not be taken in in cost accounting.

Rectification cost

In The process of manufacturing, any defect may happen, it involve expense, for
rectification, of such cost isknown as rectification cost.

Reasons for defective

Poor quality of material, lack of skin or training, lack of proper supervision, careless
inspection poor working condition, defective plant and equipments,, faulty design of
products wrong tool setting etc.,

​step to be taken to eliminate the reason of defective work

● Setting standard with compare with actual production

● Make best engineering with production department
● Best method of purchasing, EOQ Etc.,
● Use best quality of material
● Best arrangement of plant and machinery
● Appointment trained employee
● Proper supervision
 ● Introduction of incentive scheme etc

Treatment of rectification cost

● Normal and identifiable cost charge to particular job /departments.

● UnIdentify cost treated as General overhead or factory overhead
● The abnormal nature of cost charged to profit and loss account

Obsolescence

Obsolescence is the saturn laws of value of an asset due to changes in in market conditions aur
Technology. It may cause change in product or method of production or invention etc.,
Treatment of obsolescence
1 ​provide additional provision for depreciation. Number 2. It can be Lipton of Costing profit and
loss account either in one lump sum or in a number of installment

● Waste is the amount of raw materials lost in the production process. This may involve
losses due to shrinkage, scrap, or evaporation. ... When the actual amount of waste
exceeds the standard waste cost, it appears as a negative quantity or usage variance in
the cost accounting reports of a business.
●
Normal wastage being a normal feature and arising in a process or operation usually
through standard set for the normal percentage of visible and invisible wastes that may
be anticipated to arise in various manufacturing processes or operations.

Abnormal Wastage (Loss)

Abnormal wastage is a wastage which does not occur in the natural course and is
usefully in excess of the normal process wastage or loss. This occurs because of
carelessness on the part of the worker or the management, defective scheduling or
designing, sabotage etc.

Rule 1: expected output from a manufacturing process is the amount of the input less the
normal loss. loss occurs. If actual output exceeds expected output an abnormal gain
occurs. ... Abnormal loss (a cost) is credited to the process account: abnormal gain (a
benefit) is debited to the process account.

Control of wastage
● Record must be maintain for opening stock purchase consumption closing stock
stock waste.
● Proper maintenance of plant and machinery
● Proper handling of material
● Purchase of material in in right quality and quantity
 ● Setting up of standard norms
● Taken corrective measures if if any defects
SCRAP

In cost accounting, scrap is defined as material that's left over after production. Scrap
has a low sales value, if it has any value at all. You sell scrap “as is.” No costs are added
to scrap before you sell it to someone.
Features.
● Physically available, if you have realizable value. Generally small value. It does not
require further processing.

​Types of scrap
● Legitimate scrap. It can be determined or anticipated in advance.
● Administrative scrap. This type is on the basis of Administrative decisions
example change in design.
● Defective scrap. This type of scrap result from poor quality of material,
defective production process. Careless handling of raw material etc

Treatment of scrap accounting of scrap

Action deducted from factory overhead raw material cost or maybe credited to particular
job or process operation. If it is small value credited to costing profit and loss account.

Spoilage

Spoilage is waste or scrap arising from the production process. ... For example, an overcooked
meal cannot be served to a customer, and so is instead classified as abnormal spoilage. In
accounting, normal spoilage is included in the standard cost of goods, while abnormal spoilage
is charged to expense as incurred.

Treatment of Cost of Spoilage:

In case of abnormal spoilage, cost of spoilage is transferred to Costing Profit and Loss Account.
When, however, the normal spoiled units are used again as raw material in the same
manufacturing process, no separate treatment becomes necessary.

Control of spoilage

While designing the product the engineering production and purchase department must be
involved in in controlling the spoilage.
● Purchase the right quality of material with proper specifications.
● Proper plant and machinery should be selected.
● Workers must be proper train and experience.
● Proper recording of spoilage for each department for fixing the responsibility
 ● Adopting incentive scheme for minimise the spoilage

Defectives:
Defective products or units are those which do not meet with dimensional or quality standards
and are reworked for rectification of defects by application of material, labour and/or processing
and salvaged to the point of either standard product or substandard product to be sold as
seconds.

Remember that just hold it cannot be rectified but the defective can be rectified by reworking
and into good unit