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25 March 2011 1
E3E3--E4 (Finance) E4 (Finance)
Cost Accounting
Records
For internal circulation of BSNL only
25 March 2011 2
WELCOME
• This is a presentation for the E3-E4 (Finance)
• Module for the Topic: Cost Accounting reocrds
• Eligibility: Those who have got the Upgradation from E3
to E4.
• This presentation is last updated on 15-3-2011.
• You can also visit the Digital library of BSNL to see this
topic.
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25 March 2011 3
Accounting
• Is the process of identifying, measuring and
communicating economic information to permit
informed judgments and decisions by users of
the information.
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Cost Accounting - introduction
– Main Branches of Accounting :
• Financial Accounting
• Cost Accounting
• Management Accounting
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Financial Accounting
• Financial Accounting is the process of
recording, classifying, summarizing the
transactions of financial nature in a systematic
manner for interpreting the results thereof.
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25 March 2011 6
Cost Accounting
• Cost Accounting is the process of recording
analyzing and classifying expenditure for the
purpose of ascertaining cost of product or
service , ascertainment of profitability,
operational planning and cost control.
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25 March 2011 7
Management Accounting
• Management Accounting is the presentation of
Accounting information in such a way as to
assist the management in taking decisions and
creating policies.
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What is Cost ?
A cost is a sacrifice of resources.
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Cost Vs. Expense
Costs Balance Sheet Statement of Profit / Loss
Revenue
deduct ( - )
Period Expensing of
Capitalized Cost
Costs Expensed
As Incurred
= Operating Income
AssetsCapitalized
Costs
Non-capitalized
Costs
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25 March 2011 10
Cost
Object
Direct
Cost
Indirect
Cost
Cost
Assignment
Cost Tracing
Cost Allocation
Cost Accounting
Cost
Accumulation
Materials /
Merchandise
Labour
Capital
Overhead
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25 March 2011 11
Advantages of Cost Accounting
• Ascertainment of Cost
• Exact cost per unit
• Identification of Profitable and Non-profitable activities
• Contraction or elimination of less profitable and
expansion of profitable activities
• Determination of selling price
• Saves from loss due to injudicious fixation of prices
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25 March 2011 12
Advantages of Cost Accounting
• Calculation of tender price or quotation price
• Reliable basis for competitive quotation
• Comparison of costs
• Different periods, different volumes, different
departments
• Control of costs
• Material , labour, optimum utilisation of capacity
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25 March 2011 13
Advantages of Cost Accounting
• Planning and decision making.
• Manufacture or buy decision
• Selection of profitable product
• Operate or shut down decisions
• Selection of profitable method of production
• Pricing of the product.
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25 March 2011 14
Costing methods
• TOOLS/ METHODS: There are several
methods like job costing, standard costing,
machine hour costing, margin costing etc.
• The method adopted in BSNL is activity based
costing (ABC).
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Cost Accounting Records
(Telecommunications) Rules, 2002
1. Short title and commencement :
• Effective from 2003-04 Cost Accounting Rules
have been extended to companies engaged in
Telecommunication activities also vide the
Ministry of Finance and Company Affairs
(Department of Company Affairs) notification
dated 8th October 2002
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Cost Accounting Records
(Telecommunications) Rules, 2002
2.Application :
• These rules shall apply to every company engaged in the
processing of any one or more of the telecommunication
activities.
� Basic Telephony – (a) Telephone access (b) local call (c)
STD (d) ISD
� Cellular mobile
� Telex
� Telegraphy
� Voice mail / Audiotex service
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Cost Accounting Records
(Telecommunications) Rules, 2002
• Internet operations including gateway service / E-mail
• Packet switched public data network
• Wireless in local loop service
• Public mobile radio trunk service
• Very small aperture terminal service
• Global mobile personnel communication services
• Leased circuits
• Internet ports
• National long distance operator
• Internet telephony
• Radio paging
• Any other telecom service for commercial use
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Cost Accounting Records
(Telecommunications) Rules, 2002
3. Maintenance of Cost Records:
• Company shall maintain on regular basis -
• Books of account relating to the utilisation of
materials, labour and other items of cost.
• Proformae
• It shall be completed within 90 days from the
close of financial year.
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Books of Accounts
• Assets
• Costs
• Materials and supplies
• Salaries and wages
• Service department expenses
• Utilities
• Repair and maintenance
• Royalty and technical know-how fees
• Research and development expenses
• Human resource development cost
• Interest and borrowing cost
• Expenses for interconnection
• overheads
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Books of Accounts
• Activity
• Statistical / technical records
• Captive consumption
• Reconciliation of cost and financial accounts
• Variance analysis
• Related party transactions
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Cost Accounting Records
(Telecommunications) Rules, 2002
4. Penalty:
• If a company contravenes the provisions of Rule 3, the
company and every officer thereof who is in default, shall
be punishable under Sec. 642(2) read with Sec. 209(5) &
209(7) of the Companies Act.
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Nodal authorities
• Nodal authority Activities
1. Corporate Office ILD, NLD
2. Data Networks internet including
gateway & e-mail,
Internet telephony
& internet ports
3. TCO Calcutta Telegraphs and
Telex
4. Territorial circles Basic services,
CMTS, WLL,
Circuits etc
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25 March 2011 23
Support functions in BSNL
• Telecom Factory
• Telecom Stores
• Training Centers
• Quality Assurance circle
• Technical and Development Circle
• CPAO (ITI Bills)
• NCES
• IT Circle
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Service Products / Activities
• Basic Telephony
• National Long Distance Service
• International Long Distance Service
• Cellular Mobile Telephone Service
• Telex
• Telegraph
• WLL
• Leased Circuit
• Internet Services (Including Internet telephony, ports)
• PSPDN
• VSAT
• Value added Services
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Cost Centers
• Operation Cost Centers :
SSAs, Units of Metro Districts, Units of
Maintenance Regions, Units of Data Network
• Service Cost Centers :
Administrative Offices, Factories, Stores,
NCES, Training Centers, Project Organization /
REP / Task Force, Civil & Electrical Wings,
CPAO(ITI Bills), IT center T&D, QA, TCO etc.,
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Proformae
• A – Capital Cost
• B – Operation Cost
• C – I – Statistics
• C II – Service Cost
• D – Allocation of Cost and
Revenue
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Proforma Items of Cost Responsibility
A
B
C
D
Asset Register All Cost Centre
Operation Cost Operation cost Centres
Service Costs Service Cost Centres
Consolidation Operation Cost Centres
All Proforma
AtoDConsolidation Telecom Circles
Cost Accounting Records for BSNL
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Assets
Operation Cost Centres (OCC) Service Cost Centres(SCC)
Operation Assets(OA) Service Assets (SA)
Proforma- A
Asset Register Maintenance
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FILLING OF PROFORMA A
• Present asset register may be retained and
service product code from 1-12 & 99 may be
filled as the case may be against each item
• Use of each asset has to be critically
reviewed and exclusive asset and common
asset has to be identified
• Only operation assets should be allotted
service product code. No product code is
allotted to service assets.
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FILLING OF PROFORMA A
• Value of commonly used OA shall be posted with code
99 and it is then apportioned to one or more service
product in the ratio of total value of all exclusively posted
assets
• Value of SA in operation cost centre should not be
apportioned to different service products but the total
should be posted in a separate proforma A
• Assets belonging to Service cost centre need not be
apportioned into different service product
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FILLING OF PROFORMA A
• The depreciation of operation assets and service assets
calculated as companies act will be utilised for cost
accounting purpose
Depreciation on assets of
cost centres
proforma Treatment in cost
accounts
Operation assets B Depreciation
Service Assets in OCC B Administrative
overheads
Service Assets in SCC C Depreciation
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FILLING OF PROFORMA B
• Employee cost- all expenses booked in employee
remunerations schedule to be posted against respective
service product
• Utilities-power/fuel from respective administrative
expenses schedule
• Stores & spares- stores issued for maintenance against
respective product
• Repair and maintenance-employee wages on
maintenance), AMC & other direct expenses.
• Other direct expenses- all other expenses other than those
included in other sub heads
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FILLING OF PROFORMA B (CONT)
• RRT- RENT RATE AND TAXES.
• INSURANCE- INSURANCE PAID ON ASSETS
• ROYALTY & TECHNICAL KNOWHOW
• OTHER OVERHEADS
• ADMN OVERHEAD DEPRECIATION OF SERVICE
ASSET OF OP. COST CENTRE,
• INSURANCE
• GENL EXPENSES
• SUB TOTAL
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•
Depreciation – of operation cost centre from proforma "
A”
Licence fee – transferred from circle office. Other
charges- interconnection , port charges, leased linecharges, spectrum royalty, spectrum licence fee, DOT
charges, others.
Note:
Expenditures shown are to be first posted in column 3 of
proforma B from the schedules/account heads shownabove and then apportioned to respective service
products in the ratio of exclusive operation asset.
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PROFORMA C• Material cost
• Employee cost
• Utilities = power / fuel
• Repair & maintenance
• Depreciation-service asset depreciation.
• Other direct expenses,
• RRT
• Insurance,
• Royalty etc.
• Admn. Overhead
• Marketing expenses
• Interest etc.
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–-Proforma C for marketing expenses has to be maintained
separately.
-Commission/discount is to be treated as marketing
expenses.
- Marketing expenses at the circle to be apportioned to the
service products in the ratio of revenue of service
products.
PROFORMA C (CONTD)
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PROFORMA D
• To be maintained by SSAs
• Cost of operation from proforma B to be posted
against each service product.
• Cost of services from proforma C to be posted
in the ratio of asset value to each service
product.
• Marketing expenses also to be similarly posted
• Revenue information to be collected service
product wise and posted in respective columns.
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Proforma D (Cont)
• REVENUE:
• Income as per Financial Records- *****
• Income as per Cost Records *****
Difference …… A
Difference may be due to :
• 1. Income on sale of assets not included in Cost records
*****
• 2. Misc Income not included in Cost records *****
• 3. Other reasons if any (Pl. specify) *****
TOTAL B
“ A” SHOULD BE EQUAL TO “B”
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Proforma D (Cont)
• EXPENDITURE
• Expenditure as per financial records ****
• Expenditure as per cost records ****
• Difference A
• Difference may be due to
1.Loss on sale of assets not included in cost records ****
2. Loss due to theft and pilferage ****
3. Write off losses ****
4. Penalties if any paid ****
5. Others (please specify) ****
TOTAL B
“A” SHOULD BE EQUAL TO “B”
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Proforma D (cont)
• Margin against each product will be shown in
proforma D
• Cost per call
• Cost of per minute use
• Margin per call
• Margin per minute use
• Margin per direct exchange line etc., will also
be shown comparing with last year
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25 March 2011 41
BSNL Policy & Procedure
• New Accounting Policy – No. 600-22/2002-03/CA dated 31-
03-2003 (Circular No. 20)
• Cost Accounting System – No.500-142/2003-CA-1/BSNL
dated 18-05-2004 (Circular No. 23)
• Cost Accounting Manual – Circular No. 23A dated 4-6-2004
• Appointment of Cost Accountant – No.500-142/2003/CA-
I/BSNL/ dated 04 -06-04
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25 March 2011 42For internal circulation of BSNL only