CA Intermediate · Cost and Management Accounting · Cost Sheet
In a cost sheet, which of the following items should be excluded altogether, as it is not a cost?
Donations to a political party are excluded from the cost sheet because they are an appropriation of profit and not a cost of producing or selling goods. Factory insurance is a production overhead and packing for transport is a distribution expense, so both are included.
- AInterest on loans for working capital
- BDonations to a political partyCorrect
- CFactory insurance
- DPacking for transport of finished goods
Explanation
Donations and similar appropriations of profit are not costs of producing or selling goods, so they are excluded from the cost sheet. Factory insurance is a production overhead, and packing for transport is a distribution cost. Interest on working capital loans is a financial item that is also generally excluded in cost accounts, but the cleanest exclusion is donations.
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