ICAI CA Intermediate Cost and Management Accounting Syllabus
Paper-3: Cost and Management AccountingOne Paper - Three Hours - 100 Marks
- To develop an understanding of the basic concepts and applications to establish the cost associated with the production of products and provision of services and apply the same to determine prices.
- To develop an understanding of cost accounting statements.
- To acquire the ability to able to apply cost information for cost ascertainment, planning, control and decision making.
Overview of Cost and Management Accounting
- Introduction to Cost and Management Accounting
- Objectives and Scope of Cost and Management Accounting,
- The users of Cost and Management accounting information, Functions of management accounting.
- Role of cost accounting department in an organisation and its relation with other departments.
- Installation of Costing System
- Relationship of Cost Accounting, Financial Accounting, Management Accounting and Financial Management.
- Cost terms and Concepts
- Cost Reduction and Cost Control
- Elements of Costs
- Cost behavior pattern, Separating the components of fixed, variable, semi-variable and step costs.
- Methods of Costing, Techniques of Costing.
- Cost Accounting with use of Information Technology.
- Elements of Cost and preparation of Cost Sheets
- Functional classification and ascertainment of cost
- Preparation of Cost Sheets for Manufacturing sector and for Service sector
Ascertainment of Cost and Cost Accounting System
- Material Cost
- Procurement procedures- Store procedures and documentation in respect of receipts and issue of stock, Stock verification,
- Valuation of material receipts,
- Inventory control
- Techniques of fixing level of stocks- minimum, maximum, re-order point, safety stock, determination of optimum stock level,
- Determination of Optimum Order quantity- Economic Order Quantity (EOQ),
- Techniques of Inventory control- ABC Analysis, Fast, Slow moving and Non moving (FSN), High, Medium, Low (HML), Vital, Essential, Desirable (VED), Just-in-Time (JIT)- Stock taking and perpetual inventory system, use of control ratios,
- Inventory Accounting
- Consumption- Identification with products of cost centres, Basis for consumption entries in financial accounting, monitoring consumption.
- Employee Cost
- Attendance and Payroll procedures
- Elements of wages- Basic pay, Dearness Allowance, Overtime, Bonus, Holiday and leave wages, Allowances and perquisites.
- Employee Cost Control
- Employee Turnover- Methods of calculating employee turnover, causes of employee turnover, effects of employee turnover.
- Utilisation of Human Resource, Direct and indirect employee Cost, charging of employee cost, Identifying employee hours with work orders or batches or capital jobs.
- Remuneration systems and incentive schemes
- Time Rate System, Piece Rate System, Differential piece rate system, Calculation of wages, Effective Wages.
- Direct Expenses
- Direct Expenses
- Nature of Direct or Chargeable expenses.
- Sub-contracting- Control on material movements, Identification with the main product or service.
- Functional analysis- Factory, Administration, Selling, Distribution, Research and Development.
- Behavioral analysis- Fixed, Variable and Semi- Variable.
- Allocation and Apportionment of overheads using Absorption Costing Method.
- Factory Overheads- Primary and secondary distribution,
- Administration Overheads- Method of allocation to cost centres or products,
- Selling& Distribution Overheads- Analysis and absorption of the expenses in products/ customers, impact of marketing strategies, cost effectiveness of various methods of sales promotion.
- Treatment of Research and development cost in cost accounting.
- Concepts of Activity Based Costing (ABC)
- Recording and Accounting of Costs
- Non-integrated Cost Accounting system- Ledger under non-integral system
- Integrated (Cost and Financial) Accounting system- Ledgers under integral system.
- Difference between the Non- integrated and Integrated Accounting system.
- Reconciliation of profit as per Cost and Financial Accounts (under Non-Integrated Accounting System).
Methods of Costing
- Single Output/ Unit Costing
- Job Costing: Job cost cards and databases, collecting direct costs of each job, attributing overheads to jobs, Application of job costing.
- Batch Costing: Determination of optimum batch quantity, Ascertainment of cost for a batch, Preparation of batch cost sheet, Treatment of spoiled and defective work.
- Contract Costing
- Ascertainment of cost of a contract, Progress payment, Retention money, Escalation clause, Cost plus contract, Value of work certified, Cost of Work not certified.
- Determination Value of work certified, Cost of work not certified, Notional or Estimated profit from a contact.
- Process / Operation Costing
- Process cost recording, Process loss, Abnormal gains and losses, Equivalent units of production, Interprocess profit, Valuation of work in process.
- Joint Products- Apportionment of joint costs, Methods of apportioning joint cost over joint products,
- By-products- Methods of apportioning joint costs over by-products, treatment of By-product cost.
- Costing of Service Sectors
- Determination of Costs and Prices of services of following sectors/ Industries:
- Transport, Toll roads, Hospitals, Canteen/ Restaurants, Hotels/ Lodges, Educational Institutions, Financial Institutions/ Banks, Insurance, IT sector and other services.
Cost Control and Analysis
- Standard Costing
- Setting up of Standards, Types of Standards, Standard Costing as method of performance measurement.
- Calculation and Reconciliation of Cost Variances-
- Material Cost Variance, employee Cost Variance, Variable Overheads Variance and Fixed Overhead Variance.
- Marginal Costing
- Basic concepts of marginal costing, Contribution margin, Break-even analysis, Break –even and profit volume charts, Contribution to sales ratio, Margin of Safety, Angle of Incidence, Cost-Volume-Profit Analysis (CVP), Multi- product break- even analysis, Consideration of Limiting factor (key factor),
- Determination of Cost of a product/ service under marginal costing method, determination of cost of finished goods, work-in-progress,
- Comparison of Marginal costing with absorption costing method- Reconciliation of profit under the both methods,
- Short term decision making using the above concepts (basic / fundamental level).
- Budget and Budgetary Control
- Meaning of Budget, Essentials of Budget, Budget Manual, Budget setting process, Preparation of Budget and monitoring procedures.
- The use of budget in planning and control
- Flexible budget, Preparation of Functional budget for operating and non- operating functions, Cash budget, Master budget,
- Introduction to Principal/ Key budget factor, Zero Based Budgeting (ZBB), Performance budget, Control ratios and Budget variances.
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