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Cost Accounting · Cost Accounting Standards (CAS 1 to CAS 24)

CAS 13 to CAS 18 Notes for CMA Intermediate

Updated 10 October 2026 · Fact-checked

CAS 13 to CAS 18 cover service cost centres (13), pollution control (14), selling and distribution overheads (15), depreciation and amortisation (16), interest and financing charges (17) and research and development (18). Each tells you what to include in cost, how to measure it and how to assign it. Joint costs sit in CAS 19.

Understand CAS 13 to CAS 18: Cost of Service, R&D, Pollution and Joint Costs

Cost Accounting Standards (CAS) issued by the Cost Accounting Standards Board of ICMAI set one way to measure, assign and present each cost. They stop two firms from treating the same cost differently. For this block, learn each standard as three things: what it covers, what is included or excluded, and how the cost reaches the product or service.

The six standards are: CAS 13 Cost of Service Cost Centre, CAS 14 Pollution Control Cost, CAS 15 Selling and Distribution Overheads, CAS 16 Depreciation and Amortisation, CAS 17 Interest and Financing Charges, and CAS 18 Research and Development Costs. Your chapter heading also mentions joint costs and by-products. These are in CAS 19 Joint Costs, so study that standard along with this block.

CAS 13 deals with service cost centres such as power house, canteen, repairs or stores. They do not make the product, but they serve other departments. Their cost is collected first and then assigned to the departments or cost objects that use the service, on a measurable basis such as units consumed, hours or headcount. CAS 14 covers the cost of preventing, controlling and treating pollution. Such cost is assigned to the cost objects that cause it. Typically, fines and penalties are not treated as a cost of production, and recoveries from the sale of waste or residue are usually set against the cost. Confirm the exact inclusions, exclusions and treatment of recoveries in your ICMAI study material.

CAS 16 treats depreciation (tangible assets) and amortisation (intangible assets) as the systematic spreading of cost over useful life. The charge should follow how the asset is used. CAS 17 deals with interest and financing charges, which are identified separately as finance cost. CAS 18 splits R&D into research (exploring new knowledge, charged as incurred) and development (applying that knowledge to a product or process, which can be carried forward and amortised when the conditions for doing so are met). Always check the exact wording in your ICMAI study material for inclusions and exclusions.

Joint costs (CAS 19): when one process makes two or more products that cannot be separated before a split-off point, the common cost is a joint cost. It is shared among joint products on a rational basis, commonly sales value or net realisable value at split-off, or physical units. A by-product has low value compared with the main products. Its net realisable value is normally adjusted against the joint cost.

Key rules to remember

Joint cost apportionment on sales value at split-off
Share of joint cost = Joint cost × (Sales value of the product ÷ Total sales value of joint products)
Use when products are saleable at split-off. Deduct by-product NRV from joint cost first.
Net realisable value (NRV) of a by-product
NRV = Selling price − Further processing cost − Selling and distribution cost
Credit it to the joint cost pool when by-product value is not significant.
Joint cost to be shared
Net joint cost = Total joint cost − NRV of by-products
Apportion this figure, not the gross joint cost, among the joint products.
Amortisation of capitalised development cost
Annual charge = Capitalised development cost ÷ Useful life (straight line)
Starts when the product or process is ready for use. Research cost is not capitalised.
Service cost centre assignment
Rate = Cost of service cost centre ÷ Total units of service; Charge to user = Rate × Units used
Choose a usage-based measure such as kWh, hours or headcount.

How to solve CAS 13 to CAS 18: Cost of Service, R&D, Pollution and Joint Costs questions

Use this order for any question on CAS 13 to CAS 18 or joint costs. It works for theory notes and for numerical questions.

  1. 1Identify the cost and the standard: service centre (13), pollution (14), selling and distribution (15), depreciation (16), interest (17), R&D (18) or joint cost (19).
  2. 2State what the standard includes and excludes. For example, research cost is not capitalised, and fines are typically kept out of pollution cost. Confirm the exact list in your study material.
  3. 3Separate the items given into product cost, period cost and items outside cost accounts, such as notional or non-cost items.
  4. 4Choose the assignment basis. Prefer a direct or usage basis. For joint costs, use the basis stated in the question, otherwise sales value or NRV at split-off.
  5. 5Do the arithmetic in order: deduct by-product NRV or recoveries first, then apportion, then compute per unit.
  6. 6Show a neat table and total check: shares must add back to the cost pool.
  7. 7Close with a one-line statement of the treatment and the standard followed.

Quickest way: Three-question screen for CAS treatment

When to use it: For MCQs and short theory parts where you must decide the treatment fast.

  1. Ask: is it a cost of producing or serving? Penalties, fines and notional items are typically excluded. Confirm in your study material.
  2. Ask: does it benefit one period or many? Many periods means spread over useful life or capitalise and amortise, under the standard's conditions.
  3. Ask: can it be traced to a cost object? If yes, assign directly. If no, use a usage-based basis.
  4. For joint costs, deduct by-product NRV, then split in the ratio of sales value at split-off.

Common mistakes in CAS 13 to CAS 18: Cost of Service, R&D, Pollution and Joint Costs

  • Apportioning gross joint cost and ignoring by-product NRV.

    Students rush to the ratio step.

    Fix: Write 'Net joint cost = Joint cost − by-product NRV' as your first line.

  • Treating all R&D as capitalisable.

    Students remember 'amortise' and apply it to everything.

    Fix: Research is charged as incurred. Only development cost meeting the standard's conditions is carried forward and amortised.

  • Including fines and penalties in pollution control cost.

    Both relate to pollution, so they look alike.

    Fix: Pollution control cost is the cost of prevention, control and treatment. Fines and penalties are typically not treated as a cost of production. Confirm the exact inclusions and exclusions in your ICMAI study material.

  • Mixing CAS 19 with CAS 13 to CAS 18 numbers in answers.

    The chapter heading groups joint costs with this block.

    Fix: Quote joint costs as CAS 19, and CAS 13 to CAS 18 for the other items.

  • Using a non-usage basis, such as floor area, for a service centre such as power.

    Floor area is the habitual apportionment basis.

    Fix: Use a measure of consumption, such as kWh or hours, as CAS 13 prefers a usage basis.

  • Charging notional interest on own funds as financing cost.

    Interest on capital is taught in costing for decision making.

    Fix: Treat actual interest and financing charges under CAS 17. Do not mix in imputed amounts unless the question asks for them separately.

Worked examples

Example 1

A process yields two joint products, A and B, and a by-product C. Joint cost is ₹5,00,000. Output: A 4,000 kg selling at ₹90 per kg; B 2,000 kg selling at ₹120 per kg at split-off; C 800 kg with NRV of ₹25 per kg. Apportion the joint cost on sales value at split-off, treating NRV of C as a reduction in joint cost. Find the cost per kg of A and B.

Show the solution
  1. NRV of by-product C = 800 × ₹25 = ₹20,000.
  2. Net joint cost = ₹5,00,000 − ₹20,000 = ₹4,80,000.
  3. Sales value of A = 4,000 × ₹90 = ₹3,60,000. Sales value of B = 2,000 × ₹120 = ₹2,40,000. Total = ₹6,00,000.
  4. Ratio A : B = 3,60,000 : 2,40,000 = 3 : 2, that is 60% and 40%.
  5. Joint cost to A = 60% × ₹4,80,000 = ₹2,88,000. Joint cost to B = 40% × ₹4,80,000 = ₹1,92,000. Check: 2,88,000 + 1,92,000 = ₹4,80,000.
  6. Cost per kg of A = ₹2,88,000 ÷ 4,000 = ₹72. Cost per kg of B = ₹1,92,000 ÷ 2,000 = ₹96.

Answer: Joint cost to A is ₹2,88,000 (₹72 per kg) and to B is ₹1,92,000 (₹96 per kg).

Example 2

A company spent ₹4,00,000 on research and ₹10,00,000 on development of a new product in the year. The development cost meets the conditions for deferral and will be amortised on a straight-line basis over 5 years from the start of production. Year 1 production is 25,000 units. Show the treatment and the amortisation cost per unit in year 1.

Show the solution
  1. Research cost of ₹4,00,000 is not carried forward. It is charged as incurred.
  2. Development cost of ₹10,00,000 is capitalised, as it meets the stated conditions.
  3. Annual amortisation = ₹10,00,000 ÷ 5 = ₹2,00,000.
  4. Amortisation per unit in year 1 = ₹2,00,000 ÷ 25,000 units = ₹8.

Answer: Research of ₹4,00,000 is charged as incurred. Development of ₹10,00,000 is amortised at ₹2,00,000 a year, giving ₹8 per unit in year 1.

Exam tips

  • Learn the CAS number with its title as a pair. MCQs often give a title and ask for the number, or the reverse.
  • In joint cost problems, always write the by-product NRV step first, even if it is zero, to secure step marks.
  • For theory, structure each standard as objective, items included, items excluded and assignment basis. Use bullets.
  • Keep the research versus development distinction ready. It is the classic MCQ trap in CAS 18.
  • Attempt the MCQs fully, since there is no negative marking.

Practice questions from Cost Accounting Standards (CAS 1 to CAS 24)

CAS 13 to CAS 18: Cost of Service, R&D, Pollution and Joint Costs in other exams

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

CAS 13 to CAS 18: Cost of Service, R&D, Pollution and Joint Costs: frequently asked questions

What does CAS 13 cover?

CAS 13 covers the cost of service cost centres, such as power, repairs and canteen. It deals with how their cost is measured and assigned to the departments or cost objects that use the service. Prefer a usage-based basis.

Which CAS deals with joint costs and by-products?

Joint costs are in CAS 19, not in CAS 13 to CAS 18. Your chapter groups them for study. Learn the apportionment on sales value or NRV at split-off and the treatment of by-product NRV.

How are research and development treated under CAS 18?

Research cost is charged as incurred. Development cost that meets the standard's conditions can be carried forward and amortised over the useful life of the product or process. Check the conditions in your study material.

What is the difference between CAS 16 and CAS 17?

CAS 16 covers depreciation of tangible assets and amortisation of intangibles, spreading cost over useful life. CAS 17 covers interest and financing charges, which are the cost of borrowed funds and related finance costs.