EXPLAIN the treatment of given items of Cost in Cost Sheet/Statement (i) Abnormal costs (ii) Subsidy/Grant/Incentives (iii) Penalty, fine, damages,…

Treatment of various items of Cost in Cost Sheet/Statement (i) Abnormal costs: Any abnormal cost, where it is material and quantifiable, shall not form part of cost of production or acquisition or supply of goods or provision of service. Examples of abnormal costs are: Cost pertaining to or arising out of a pandemic e.g. COVID-19Cost associated with employees due to sudden lockdown. (ii) Subsidy/Grant/Incentives: Any such type of payment received/ receivable are reduced from the cost objects to which such amount pertains. (iii) Penalty, fine, damages, and demurrage: These types of expenses are not form part of cost. (iv) Interest and other finance costs: Interest, including any payment in the nature of interest for use of non-equity funds and incidental cost that an entity incurs in arranging those funds. Interest and finance charges are not included in cost of production. Interest and Financing Charges shall be presented in the cost statement as a separate item of cost of sales.