Updated: May 25, 2023
THE INTRODUCTION:
The client is a central public sector enterprise (CPSE) incorporated to set up a natural gas-based ammonia urea complex along with offsite and utility facilities with a design capacity of 2,200 MTPD Ammonia Units and a 3,850 MTPD Urea Plant.
THE PROBLEM:
The company’s problem statement is two-fold:
To mitigate the risk of uninformed decisions due to the non-availability of robust costing data caused by inconsistent assumptions in the decision support system and lack of staffing.
To adopt a consistent costing strategy approach across all the subsidiaries and group companies.
THE SOLUTION:
The company wanted us to document the entire cost accounting process in the form of a manual including the whole value chain relating to cost accounting. This exercise will produce a comprehensive document that can support the costing decision support system.
A costing manual is not just an SOP (Standard Operating Procedure) document for the cost accounting processes but also a white paper on the controlling function of the organisation to support effective decision-making. The manual is a booklet containing detailed instructions to be followed by the Management Information System (MIS) and Cost Accounting department, along with other departmental teams, concerning cost accounting system maintenance, cost determination and its control. It lays down the recommended cost accounting plans, policies and related issues so the system can operate efficiently and effectively.
A typical uniform costing manual details - (a) objectives and the method of its administration and (b) the procedure to be followed for regular collection, analysis and reporting of cost data and their interpretation to the member units.
After the advent of IT ERP systems, cost management accounting is majorly shifting to ERP systems. Therefore, it is imperative to maintain congruency of the costing manual with the SAP-CO end user manual, and this is where the rubber meets the road.
THE RESULTS:
Table of Contents of a typical Cost Accounting Manual:
FOOTNOTES
FREQUENTLY ASKED QUESTIONS:
CONTACT US
Reach us if you have any concerns regarding cost management accounting issues in your organization.
SANKALP WADHWA
Partner, Chandra Wadhwa & Co. (Cost Accountants) | B.Com, FCMA, ACA, DISA | Certified SAP-CO Consultant | Executive Program on Management and Finance (IIM, Ahmedabad)
Address: 1305 & 1306, Vijaya Building, 17, Barakhamba Road, New Delhi - 110001, India Mail: sankalp.wadhwa@cwcindia.in
Tel: +91-8800018190, +91-7503703599.
Website: www.cwcindia.in