HOW TO PREPARE COST SHEET

A cost sheet is a memorandum statement of cost. It shows the total cost as well as the cost per unit for a given period. A cost sheet is prepared usually for a period which may be a week or a month or a quarter or a year. Logical arrangement of costs is made in the cost sheet along with proper classification and sub-division of costs. As such, cost sheet is accepted as a statement to show various components of total cost in a classified manner i.e. Prime cost, Works Cost, Cost of production, Cost of goods sold and Total cost. Cost sheet is otherwise known as statement of cost.

Nature of cost sheet :

i) It is a statement designed to show output and costs incurred for the output during a period.
ii) A cost sheet does not follow any fixed form to prepare it.
iii) It is a memorandum statement & does not follow the rules of double entry.
iv) It incorporates data from financial accounting for ascertainment of total cost.
v) It also uses pre-determined rates for preparation of cost sheet.

Purposes of cost sheet :

The purposes of preparing a cost sheet can be studied from its advantages which are given as below :

i) It reveals total cost and unit cost of output.
ii) It shows the logical division of the total costs into different elements of cost.
iii) It facilitates control over cost of current year’s cost data in relation to that of the previous year element wise.
iv) It helps in the estimation of costs for preparation of tenders and quotations.
v) It helps in fixation of selling price.
vi) It helps the manufacturer in formulating a definite useful production policy.
vii) It helps to minimise the cost of production in a competitive market.

Proforma of a Cost Sheet :

COST SHEET OR STATEMENT OF COST OF ___________
for the month ending _______________ 2008

Output : ___________ units
Total Cost Cost per unit
Rs. Rs.
Direct materials ________ _______
Direct labour ________ _______
Direct Expenses _______ ______
PRIME COST ________ _______
Add: Factory /works
overheads ________ _______
FACTORY COST /
WORKS COST ________ _______
Add : Administration
overheads _______ _______
COST OF PRODUCTION _______ _______
Add: Selling and
Distribution overheads ______ ______
TOTAL COST (OR
COST OF SALES) _______ _______
Add: Profit (or minus loss) ______ ________
SALES __________ ________