Cost and Management Audit · Companies (Cost Records and Audit) Rules, 2014

Maintenance of Cost Records and Cost Accounting Records under Companies Rules, 2014

Updated 11 October 2026 · Fact-checked

Under the Companies (Cost Records and Audit) Rules, 2014, a company covered by the Rules must keep cost records in the CRA-1 format. They must show the cost per unit, cost of sales and margin for each product or activity every year, be kept at a place in India decided by the Board, be kept for at least eight years, and the Board must ensure compliance.

Understand Maintenance of Cost Records and Cost Accounting Records

Section 148 of the Companies Act, 2013 lets the Central Government direct certain classes of companies to keep cost records. The Companies (Cost Records and Audit) Rules, 2014 give effect to this. First, another rule of the Rules decides which companies must keep cost records, based on their industry and size. Then the rule on maintenance tells those companies how to keep them.

Think of two layers. Cost accounting records are the books that capture the use of materials, labour and other inputs. Cost records are wider. They include the cost accounting records plus the cost statements and other records built from them. In the exam, keep this difference clear.

The records must be kept on a regular basis, not made up at year-end. The test is practical: from your records, can you work out the per unit cost of production or cost of operations, the cost of sales and the margin for each product or activity for every financial year? If not, the records are not adequate.

The records follow generally accepted cost accounting principles and the Cost Accounting Standards issued by ICMAI. They are kept in the CRA-1 format, which sets out the items the records should cover. They may be maintained in physical or electronic form.

The responsibility sits with the Board of Directors. The Board must see that proper systems exist, that records are kept at the right place and for the right period, and that they are available to the cost auditor. The cost auditor does not keep the records. The auditor checks them.

Key rules to remember

Who keeps cost records: Company covered by the applicability rule of the Rules → must keep cost records; Maintenance is a separate step from applicability. A company must first fall within the Rules by industry and size.
Form of records: Cost records are kept in the CRA-1 format; CRA-1 is for maintaining records. The cost audit report is a different form, CRA-3.
Adequacy test: Records must allow: cost per unit of production or operation, cost of sales, and margin, product-wise or activity-wise, for every financial year; Kept on a regular basis, in line with cost accounting principles and Cost Accounting Standards.
Place of keeping: Registered office, or another place in India decided by the Board; The Board decides. Write 'in India' in your answer.
Retention period: Not less than 8 years from the end of the financial year to which the records relate; Count from the year end, not from the date of the entry.
Cost records vs cost accounting records: Cost records = cost accounting records + cost statements and other related records; Cost accounting records cover material, labour and other inputs.

How to solve Maintenance of Cost Records and Cost Accounting Records questions

Use this order for any question on maintenance of cost records, whether it is theory, a short note or a case.

1Check whether the company is covered by the Rules at all. Look at its industry and size in the case. If it is not covered, no cost records are required under the Rules.
2Name the legal basis in one line: Section 148 of the Companies Act, 2013 and the Companies (Cost Records and Audit) Rules, 2014.
3State what must be maintained: cost records in the CRA-1 format, kept on a regular basis, covering each product or activity.
4State the contents test: per unit cost, cost of sales and margin for every financial year, and the use of materials, labour and other inputs.
5State place and period: registered office or another place in India decided by the Board, and at least eight years from the end of the relevant financial year.
6State who is responsible: the Board of Directors. Mention the link to the cost auditor, who examines the records.
7Apply to the facts. Do any date count or check any gap in the records, then give a clear conclusion.
8 Close with a one-line conclusion that says whether the company complies or what it must do.

Quickest way: Five-point recall for Rule 5 questions

When to use it: Use it for MCQs and short notes where you have only two to four minutes.

Who: a covered company, and the Board is responsible.
What: cost records in CRA-1, kept regularly.
Test: unit cost, cost of sales and margin, every year.
Where: registered office or another place in India fixed by the Board.
How long: eight years from the end of the financial year.

Common mistakes in Maintenance of Cost Records and Cost Accounting Records

Counting the eight years from the date of the transaction or from the date of the audit report.
Students remember 'eight years' but not the starting point.
Fix: Count from the end of the financial year to which the records relate. For FY 2026-27, the end is 31 March 2027.
Treating Form CRA-1 as the cost audit report form.
CRA-1, CRA-2, CRA-3 and CRA-4 look similar and are learned together.
Fix: Link CRA-1 with maintaining cost records. Link CRA-3 with the cost audit report.
Saying that the cost auditor is responsible for maintaining cost records.
Students confuse who keeps the records with who examines them.
Fix: The Board of Directors ensures the records are kept. The cost auditor only audits them.
Using 'cost records' and 'cost accounting records' as exact synonyms.
Textbooks often use them loosely.
Fix: Say that cost records include cost accounting records plus cost statements and other related records.
Applying the maintenance requirement without checking if the company is covered by the Rules.
Students jump straight to CRA-1 after reading the word 'company'.
Fix: Always do the applicability check first. Cost audit applicability is a separate and narrower test than cost record applicability.
Writing that records can be kept anywhere, including abroad.
Students recall that the Board decides the place but forget the limit.
Fix: The place is the registered office or another place in India decided by the Board.

Worked examples

Example 1

Sunrise Auto Components Ltd., a company covered by the Companies (Cost Records and Audit) Rules, 2014, closes its books on 31 March each year. Up to what date must it keep the cost records for the financial year 2026-27?

Show the solution

The retention period is not less than eight years from the end of the financial year to which the records relate.
The financial year 2026-27 ends on 31 March 2027.
Add eight years: 31 March 2027 + 8 years = 31 March 2035.
The records must therefore be kept at least until 31 March 2035.

Answer: The cost records for FY 2026-27 must be kept for at least eight years from 31 March 2027, that is, up to 31 March 2035.

Example 2

Kaveri Polymers Ltd. is covered by the Rules and makes three products. Its accountant says that cost records are made once a year when the auditor visits, and only a total cost for the company is prepared. Advise the Board whether this is adequate.

Show the solution

The Rules require cost records to be kept on a regular basis, not prepared only when the auditor visits.
The records must allow the per unit cost of production or operation, the cost of sales and the margin for each product or activity for every financial year.
A single company-wide total cost does not give product-wise cost, cost of sales or margin, so it fails the test.
The Board is responsible for ensuring proper cost records in the CRA-1 format, so it should set up product-wise records for all three products, follow the Cost Accounting Standards, and decide the place of keeping in India.
The records must be kept for at least eight years from the end of each financial year.

Answer: The practice is not adequate. The company must keep regular product-wise cost records in CRA-1 for all three products, showing unit cost, cost of sales and margin, and the Board must ensure this is done.

Exam tips

In theory questions, give the five points: who, what, test, where and how long. Examiners reward each of them.
Write the retention period as 'at least eight years from the end of the financial year', and show the date calculation in numerical questions.
Use the case facts. If the case shows a company with several products, bring in the product-wise records point.
Keep CRA-1 (maintenance) separate from CRA-3 (audit report) in every answer, especially in MCQs where options are close.
Do not quote sub-rule numbers unless you are sure of them. Naming Section 148 and the 2014 Rules is enough.

Practice questions from Companies (Cost Records and Audit) Rules, 2014

Maintenance of Cost Records and Cost Accounting Records in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Maintenance of Cost Records and Cost Accounting Records: frequently asked questions

What is Form CRA-1?

It is the format in which a covered company keeps its cost records under the Companies (Cost Records and Audit) Rules, 2014. It is about maintenance of records. It is not the cost audit report.

How long must cost records be kept?

At least eight years from the end of the financial year to which they relate. For FY 2026-27 that means up to at least 31 March 2035.

Where must cost records be kept?

At the registered office of the company or at another place in India decided by the Board of Directors.

Who is responsible for maintaining cost records?

The Board of Directors of the company. The cost auditor examines the records but does not keep them.

Can cost records be kept in electronic form?

Yes. Records may be kept in physical or electronic form, as long as they meet the Rules and can show the required cost information.