# Cost Sheet — Structure and Build-up
## What is a Cost Sheet?
A Cost Sheet is a statement that shows the build-up of total cost of a product or job, classified into successive layers, leading from raw material to cost of sales. It is the foundational format for cost accounting.
## The Standard Format (with running totals)
| Step | Item | Treatment |
|---|---|---|
| 1 | Direct Material | Add |
| 2 | Direct Labour | Add |
| 3 | Direct Expenses | Add |
| A | = PRIME COST | Sub-total |
| 4 | (+) Factory Overheads | Add |
| 5 | Adjustment for WIP (Opening + ; Closing −) | Adjust |
| B | = FACTORY COST (Works Cost) | Sub-total |
| 6 | (+) Administrative Overheads | Add |
| C | = COST OF PRODUCTION | Sub-total |
| 7 | Adjustment for Finished Goods (Opening + ; Closing −) | Adjust |
| D | = COST OF GOODS SOLD | Sub-total |
| 8 | (+) Selling Overheads | Add |
| 9 | (+) Distribution Overheads | Add |
| E | = COST OF SALES | Final Total |
| 10 | (+) Profit | Add |
| F | = SALES | Top line |
## Why Sub-totals at Each Stage?
Each intermediate total tells management something useful:
- Prime Cost → core variable cost of production
- Factory Cost → cost up to point of physical completion
- Cost of Production → cost ready to be moved to FG store
- Cost of Goods Sold → cost of what is actually sold (vital for matching with revenue)
- Cost of Sales → total cost incurred to sell the product
## Two Critical Adjustments
1. WIP adjustment is done after Factory Overheads because WIP is partially worked-on stock in the factory.
2. Finished Goods adjustment is done after Cost of Production because FG is fully-completed stock waiting to be sold.
## Memory Tip
> "P → F → P → G → S" — Prime → Factory → Production → Goods Sold → Sales