The following items which are included in the financial accounts of a manufacturing concern, shall not be included in cost accounts since they are not related to cost of production:
1. Items of Appropriation of Profit
(a) Income tax paid and legal expenses incurred in connection with the assessment of income tax.
(b) Transfer to reserves.
(c) Dividends on shares paid by a company.
(d) Amount written off — goodwill, preliminary expenses, underwriting commission, discount allowed on shares or debentures.
(e) Bonus paid to the employees of the undertaking, if such payment is based on profits.
2. Items of Pure Finance
(a) Interest and dividends received on investments.
(b) Rent received.
(c) Profit or loss on sale of investments, fixed assets etc.
(d) Expenses on raising capital.
(e) Cash discount allowed or received.
3. Abnormal items
(a) Cost of abnormal idle time.
(b) Cost of abnormal wastage of materials.
(c) Exceptional bad debts.
(d) Abnormal saving.
(e) Penalties and fines paid for the infringement of Govt. rules and regulations.