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CA Intermediate · Cost and Management Accounting · Cost Sheet

In a cost sheet, which of the following items is excluded because it is a financial or purely appropriation item rather than a cost?

Interest on loan paid on capital borrowed is excluded from the cost sheet because it is a financial charge, not an operating cost. Carriage inwards, royalty on production and depreciation on factory plant are genuine costs of production and are included.

  1. ACarriage inwards on materials
  2. BRoyalty on production
  3. CInterest on loan paid on capital borrowedCorrect
  4. DDepreciation on factory plant

Explanation

Interest on borrowed capital is a financial charge and is generally excluded from the cost sheet under cost accounting. Carriage inwards adds to material cost, royalty on production is a direct expense, and factory plant depreciation is a factory overhead. So only interest is excluded.

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