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CMA Intermediate · Cost Accounting

Cost Accounting Standards CAS 1 to CAS 24 for CMA Inter

Cost Accounting Standards (CAS) are standards issued by the Cost Accounting Standards Board of ICMAI that set out how to measure, assign and present cost items. CAS 1 to CAS 24 cover topics from classification of cost to grants and subsidies. To handle them, learn each standard's principle, what to include, what to exclude, and how to treat credits.

What this chapter covers

This chapter covers the Cost Accounting Standards issued under the Cost Accounting Standards Board (CASB) of ICMAI. Each standard fixes how one cost item is measured, assigned to products or services, and disclosed. The set runs from CAS 1 (Classification of Cost) to CAS 24 (Treatment of Revenue Grants and Subsidies). The aim is that two cost accountants costing the same item reach the same figure.

The standards fall into natural blocks. CAS 1 to CAS 6 deal with classification of cost, capacity determination, production and operation overheads, cost of production for captive consumption, average (equalized) cost of transportation and material cost. CAS 7 to CAS 12 deal with employee cost, cost of utilities, packing material cost, direct expenses, administrative overheads and repairs and maintenance cost. CAS 13 to CAS 18 deal with service cost centres, pollution control, selling and distribution overheads, depreciation and amortisation, interest and financing charges, and research and development. CAS 19 to CAS 24 deal with joint costs, royalty and technical know-how fees, quality control, manufacturing cost, overburden removal and grants and subsidies. The topic labels on this site group these standards into study blocks, so always go by the standard number and its official title.

This chapter is the rulebook behind the rest of Paper 8. When you prepare a cost sheet, absorb overheads, value material issues, treat idle time or apportion joint costs, you are applying these standards. Learn them as principles with conditions, not as lists to memorise, and keep checking them against the numerical chapters.

This chapter is worth the effort because it feeds both parts of the paper. In Section A, the 2-mark MCQs can test a single rule, such as what is included in or excluded from a cost, and there is no negative marking, so a clear recall of principles converts directly into marks. In the written section, the standards support theory answers and justify the treatment you choose in cost statements. The chapter is also mostly rule-based, so it is a good place to score if you revise it in a structured way.

Cost Accounting Standards (CAS 1 to CAS 24): topics in the order to study them

  1. 1Introduction to Cost Accounting Standards and CASBStart here to understand what a CAS is, who issues it and why it exists, so every later standard has context.
  2. 2CAS 1 to CAS 6: Classification, Overheads and MaterialsThese set the base vocabulary: cost classification, capacity, overheads and material cost, which many later standards use.
  3. 3CAS 7 to CAS 12: Employee, Utilities, Packing, Direct Expenses, Administrative Overheads and RepairsNext come the common cost heads such as employee cost, utilities, packing, direct expenses, administrative overheads and repairs, which you meet in most cost sheets.
  4. 4CAS 13 to CAS 18: Service Cost Centres, Pollution, Selling and Distribution, Depreciation, Finance and R&DThese cover service cost centres, pollution control, selling and distribution, depreciation, financing charges and R&D, which need the earlier overhead ideas.
  5. 5CAS 19 to CAS 24: Joint Costs, Royalty, Quality Control, Manufacturing Cost, Overburden and GrantsFinish with joint costs, royalty, quality control, manufacturing cost, overburden removal and grants, which are more specific and easier once the basics are firm.

How to prepare Cost Accounting Standards (CAS 1 to CAS 24)

Treat each standard as a short set of rules. Aim to answer three questions for every one: what does it cover, what goes into the cost, and what stays out or is deducted.

  1. Make a one-page list of CAS 1 to CAS 24 with the number, the official title and a one-line purpose, and learn it until you can recite it in order.
  2. Read each standard in your own words and note its principle, its inclusions, its exclusions and how credits such as scrap, discounts or recoveries are treated.
  3. Build a small table for each block comparing what is included in and excluded from cost for each standard, so similar heads do not blur together.
  4. Link each standard to a numerical chapter: apply CAS 6 in material valuation, CAS 3 in overhead absorption, CAS 7 in employee cost and CAS 19 in joint cost problems.
  5. Practise MCQs after each block, and for every wrong answer write down the exact rule you missed.
  6. Write two or three short theory answers per block, in the form of principle, treatment and a brief example, so you have a ready format for written questions.
  7. In the last week, revise only your one-page list and your inclusion and exclusion notes, then redo the MCQs you got wrong.

Common mistakes in Cost Accounting Standards (CAS 1 to CAS 24)

  • Mixing up standard numbers and titles, for example confusing CAS 3 with CAS 11 or CAS 15.

    Fix: Keep a one-page numbered list and test yourself from number to title and from title to number.

  • Learning the standards as definitions only and skipping inclusions and exclusions.

    Fix: For every standard write what is included, what is excluded and how credits are treated, since MCQs often test these points.

  • Treating the standards as separate from the numerical chapters.

    Fix: Tie each standard to a numerical topic and check your treatment of items against the relevant CAS when you practise.

  • Writing long, general theory answers with no structure.

    Fix: Use a short format: state the objective, the principle, the treatment of main items and one example, with each point on its own line.

  • Ignoring similar-looking heads such as administrative overheads versus selling and distribution overheads.

    Fix: Make a side-by-side comparison of such pairs and revise it often.

  • Leaving the later standards, such as CAS 19 to CAS 24, to the last day.

    Fix: Allocate fixed time to every block in your plan, and revise the later standards early so they are not rushed.

Last-day revision: Cost Accounting Standards (CAS 1 to CAS 24)

  • CASB is the Cost Accounting Standards Board of ICMAI, which issues the CAS.
  • CAS 1 is Classification of Cost and CAS 2 is Capacity Determination.
  • CAS 3 is Production and Operation Overheads and CAS 6 is Material Cost.
  • CAS 7 is Employee Cost, CAS 8 is Cost of Utilities and CAS 9 is Packing Material Cost.
  • CAS 10 is Direct Expenses, CAS 11 is Administrative Overheads and CAS 12 is Repairs and Maintenance Cost.
  • CAS 14 is Pollution Control Cost, CAS 15 is Selling and Distribution Overheads and CAS 16 is Depreciation and Amortisation.
  • CAS 17 is Interest and Financing Charges and CAS 18 is Research and Development Costs.
  • CAS 19 is Joint Costs and CAS 20 is Royalty and Technical Know-how Fee.
  • CAS 21 is Quality Control, CAS 22 is Manufacturing Cost and CAS 23 is Overburden Removal Cost.
  • CAS 24 is Treatment of Revenue Grants and Subsidies.
  • For each standard, recall what is included, what is excluded and how credits are treated.
  • Section A has 15 MCQs of 2 marks with no negative marking, so attempt every one.

Cost Accounting Standards (CAS 1 to CAS 24) practice questions

Cost Accounting Standards (CAS 1 to CAS 24) in other exams

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

Cost Accounting Standards (CAS 1 to CAS 24): frequently asked questions

What are Cost Accounting Standards in CMA Intermediate?

They are standards issued by the Cost Accounting Standards Board of ICMAI that lay down how cost items are measured, assigned and disclosed. In Paper 8 you learn what each standard covers and apply its rules in cost statements and overhead treatment.

How many Cost Accounting Standards do I need to cover, from CAS 1 to CAS 24?

This chapter is organised as CAS 1 to CAS 24, in five study blocks. Check the current ICMAI syllabus and study material for the exact scope required, and prepare every standard in your chapter plan.

How do I remember all the CAS numbers and titles?

Learn them in blocks of five or six and write out the numbered list from memory each week. Link each standard to a cost head you already know, such as materials, employees, overheads or joint products.

Are questions on Cost Accounting Standards mostly MCQs or written answers?

Both can appear. MCQs usually test a single rule, such as what is included in a cost, while written questions may ask you to explain a principle or apply it. Prepare for both, since Section A has no negative marking.