Cost Records Maintenance — CRA-1 & Cost Accounting Standards (CAS 1–24) Compliance

Companies Act, 2013: Section 148(1) — Central Government to specify class of companies to maintain cost records in the form prescribed; cost records to be maintained by company. Companies (Cost Records and Audit) Rules, 2014: Rule 3 — cost records to be maintained in Form CRA-1; must enable the preparation of cost statements required under Rule 6(4) and Form CRA-3; records to be maintained for 8 years. Cost Accounting Standards (CAS 1-24): issued by the Institute of Cost Accountants of India (ICAI-CMA): CAS 1 (classification of cost), CAS 4 (cost of production for captive consumption), CAS 6 (material cost — FIFO/weighted average), CAS 7 (employee cost), CAS 10 (cost of utilities), CAS 14 (pollution control cost), CAS 15 (selling and distribution overheads), CAS 16 (depreciation and amortisation), CAS 22 (manufacturing cost — aggregate framework), CAS 24 (treatment of revenue in cost statements). Rule 3(3) — cost records must be reconcilable with the company's financial statements. Records must be open to inspection by the cost auditor and by Central Government officials.

Cost records maintenance is the foundational compliance obligation for companies required under the Companies (Cost Records and Audit) Rules, 2014. Without proper cost records, a cost audit cannot be completed — and improper cost records lead to qualified cost audit reports, regulatory scrutiny, and penalties under Section 148 of the Companies Act, 2013.

Form CRA-1 prescribes the format for maintaining cost records under the Companies (Cost Records and Audit) Rules, 2014. CRA-1 requires companies to maintain cost records in a manner that enables the preparation of the cost statements required for the CRA-3 cost audit report. The records must be maintained for each product/service group specified in the cost audit applicability determination.

The 24 Cost Accounting Standards (CAS 1–24) issued by the Institute of Cost Accountants of India (ICAI-CMA) provide the detailed methodology for each element of cost. The most critical standards for manufacturing companies are:

CAS 4 — Cost of Production for Captive Consumption: When goods are manufactured and captively consumed (not sold), their cost must be determined per CAS 4 — important for GST valuation of self-supplies and excise purposes. Transfer pricing between related entities also references CAS 4.

CAS 7 — Employee Cost: How salaries, wages, PF, ESIC, gratuity, bonus, and LTA are allocated to cost centres and products. Direct employee cost (factory workers) is allocated directly; indirect employee cost (supervisors, management) is allocated using appropriate cost driver bases.

CAS 10 — Cost of Utilities: How power consumption, fuel consumption, and water usage are allocated to products. Requires meter readings at the cost centre level, or allocation keys based on machine hours, production hours, or physical measurements.

CAS 15 — Selling and Distribution Overheads: Treatment of advertising, commission, freight outward, after-sales service costs — whether included in cost of sales or treated as period costs.

CAS 22 — Manufacturing Cost: The framework for aggregating all cost elements into total manufacturing cost — the backbone of the CRA-3 cost statement.

The CA firm's role in cost records maintenance includes: (i) designing the cost centre structure aligned with the company's production process and product mix; (ii) configuring the ERP/accounting system (SAP, Tally, Oracle) to capture cost data at the required granularity; (iii) training the accounts/costing team on CAS requirements; (iv) preparing monthly/quarterly product-wise cost statements; (v) performing year-end reconciliation with financial statements; and (vi) preparing the CRA-3 draft cost statements for the cost auditor (CMA) to certify.