Determination of Average (Equalized) Cost of Transportation CAS 5

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S.A.MuraliPrasad Co-optedmember,CostAccountingStandardsBoard

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Transport Cost

Introduction
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Transportationcostisanimportantelementof costforprocurementofmaterialsfor productionandfordistributionofproductfor sale.Itshouldbepresentedseparatelyfrom othercostofinwardmaterialsorcostofsales offinishedgoods. TheFinanceAct2003specifiesthe certificationrequirementoftransportationcost forclaimingdeductionwhilearrivingatthe assessablevalueofexcisablegoodscleared forhomeconsumption/export.
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Objective
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Tobringuniformityintheapplicationof theprinciplesandmethodsusedandfor providingtransparencyindeterminationof thiscost. Toprescribethesystemtobefollowed formaintenanceofrecordsforcollection, apportionmentandallocationofthiscost tocostcenters,locationsorproducts.

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Scope
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Thestandardshouldbeappliedfor calculationofcostoftransportation requiredunderanystatuteorregulation orforanyotherpurpose.

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Maintenance of Records
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Properrecordsshallbemaintained showingeachelementofcostsuchas freight,cartage,transitinsuranceand othersafteradjustmentforrecoveryof transportationcost.Abnormalcosts relatingtotransportation,ifany,aretobe identifiedandrecordedforexclusionof computationofaveragetransportation cost.

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Maintenance of Records
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Incaseofamanufacturerhavinghisown transportfleet,properrecordsshallbe maintainedshowingdetailsofsalaries andwagesofdriver,cleanersandothers, costoffuel,lubricantgrease,amortized costoftyresandbattery,repairsand maintenance,depreciationofthe vehicles,distancecoveredandtrips made,goodshauledandtransportedto thedepot.
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Maintenance of Records
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Incaseofhiredtransportcharges incurredfordespatchofgoods,complete detailsshallberecordedastodateof despatch,typeoftransportused, descriptionofthegoods,destinationof buyer,nameofconsignee,challan number,quantityofgoodsintermsof weightorvolume,distanceinvolved, amountpaid,etc.

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Maintenance of Records
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Furtherseparaterecordsof transportationcostforthefollowinghasto bemaintained. Forinwardandoutwardtransportation costspecifyingthedetailsandparticulars ofgoodsdespatched,nameofsupplier/ recipient,amountoffreightetc.

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Maintenance of Records
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Forhomeconsumptionandexport. Fromfactorytodepotandthereaftershall bemaintainedseparately.

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Maintenance of Records
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Forcarryinganymaterial/producttojobworkersplaceandbackshouldbemaintained separatelysoasincludethesameinthe transactionvalueoftheproduct. Forgoodsinvolvedexclusivelyfortrading activitiesshallbemaintainedseparatelyandthe samewillnotbeincludedforclaimingany deductionforcalculatingassessablevalue excisablegoodsclearedforhomeconsumption.

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Maintenance of Records
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Costthatcanbedirectlyallocabletoa particularcategoryofproductsshouldbe maintainedseparatelysothatallocationin appendix3canbemade. Forcommontransportationcost,bothfor ownfleetandhiredones,properrecords forbasisofapportionmentshouldbe maintained.

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Maintenance of Records
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Forexemptedgoods,excisablegoods clearedforexportshallbemaintained separately. Costsformodeoftransportationother thanroadlikeship,airetcaretobe maintainedinappendix2whichwillbe includedintotalcostoftransportation.

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Treatment of Cost
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Thecosthastobeallocated/apportionedto materials/productsonasuitablebasis.Oncethe basisofapportionmentisadoptedthesame shouldbefollowedconsistently. Abnormalandnonrecurringcostshallnotform apartofthecost. Inwardtransportationcostsshallformpartof thecostofprocurementofmaterials. Outwardtransportationcostshallformpartof thecostofsale.
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Treatment of Cost
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Thefollowingbasismaybeused,inorderof priority,forapportionmentofoutward transportationcost.

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I)weight. Ii)volumeofgoods. Iii)Tonne-km. Iv)unit/equivalentunit. V)valueofgoods. Vi)percentageofusageofspace.

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Treatment of Cost
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Thebasiswillbeselecteddepending uponthenatureofproducts,unitof measurementfollowedandtypeof transportused.

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Cost Sheet
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Thecostsheetsshallbepreparedand presentedinaformasperappendices 1,2and3orasnearthereto. Appendix1and2showthedetailsof informationtobemaintainedfor compilationoftransportcostforownfleet andhiredtransportationcharges respectively.

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Cost Sheet
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Appendix1isapplicablewheretheorganization ishavingitsownfleet. Thedirectlyallocablecostofownfleet (outward)shallbeidentifiedagainstdifferent categoriesofproductsasshowninappendix3 andsameshallbeindicatedthere.Similarly, totalcommoncostofownfleet(outward)shall beapportionedtodifferentcategoriesof productsasshowninappendix3onabasis whichshouldbespecified.
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Cost Sheet
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Properrecordsshallbemaintainedtoshow separatelythetransportationcostrelatingto sendingofjobstojobcontractors/convertersand receiptbackofprocessedjobs/converted materials. Anenterpriseshallberequiredtomaintaincost recordsandotherbooksofaccountinamanner whichwouldfacilitatepreparationandverification ofcostoftransportationandotherrelatedcharges anditsapportioningtovariousproducts.
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Thank you!

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