Development cost is the cost of the proces

Development cost is the cost of the process which begins with the implementation of decision to produce a new or improved product or to employ a new or improved method and end with the commencement of formal production of that product or by that method. Development starts where research ends as development expenditure is incurred for putting the results of research on a practical commercial basis. In fact, research indicates whether it is scientifically and technologically possible to manufacture a product according to a specified design. Development is the next stage when a small unit of production is made on a trail or pilot run under practical conditions of production to see whether large scale manufacture would be commercially sound. If the concern gets success, then full scale production is undertaken. Thus development forms a bridge between the research and production though it is more close to the latter. The benefits of research are passed on to the development and the result obtained from development work are passed on to benefit production.

Special Features of Research and Development cost -

• Research and development cost is incurred ahead of actual production. therefore, it may not be charged to production
• The benefit on this cost is experienced over a number of future years; so it is deferred revenue expenditure.
• The amount of expenditure in research and development is huge; so it becomes difficult for a small concern to undertake the research and development work.
• Sometimes research being unsuccessful gives no tangible result and huge expenditure incurred on research is wasted.
• A great difficulty is experienced in fixing proper standards against which efficiency of research and development expenditure is to be measured.
• There are varied objects for which the research and development is undertaken. In order to meet the requirements of different circumstances, such cost requires different accounting treatments

Taking into consideration the prevailing competitive conditions, research and development is necessary not only for growth of the business but also for its survival. Large scale industries spend large sum on research and development in order to carry out this function on continuous basis.