Cost sheet is a statement designed

Cost sheet is a statement designed to show the output of a particular accounting period along with breakup of cost.The data incorporated in cost sheet are collected from various statements of accounts which have been written in cost statement, either day to day or regular records. There is no fixed form for preparation of cost sheet but in order to make the sheet more useful it is generally presented in columnar form. The columns are for the total cost of current period, per unit for the current period, total cost and per unit cost for a preceding period and total and per unit cost for the budget period and so on. The information to be incorporated in cost sheet would depend upon the requirement of management for the purpose of control. Cost sheet is a memorandum statement. Therefore it does not form part of double entry cost accounting records. Inspite of this, the relationship between cost sheet and financial accounts which are maintained on double entry system is very important as cost sheet derives its data from financial accounting. In case predetermined rates are not used, the entire data required for preparation of cost sheet is derived from financial accounting. Therefore, periodically it becomes necessary to reconcile the information obtained from cost accounting and financial accounting separately.

The main advantages of cost sheet:

• It disclose the total cost and cost per unit of the units produced during the given period
• It enables the manufacturer to keep a close watch and control over the cost of production
• By providing a comparative study of the various elements of cost with the past results and standard costs, it is possible to find out the causes of variations in cost and to eliminate the advance factor and conditions which go to increase the total cost.
• It acts as a guide to the manufacturer and helps him in formulating a definite useful production policy.