CMA (Cost & Management Accountancy) Intermediate: Financial and Cost Accounting Syllabus

Intermediate: Financial and Cost Accounting syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Intermediate: Financial and Cost Accounting in CMA (Cost & Management Accountancy), not a summary of it.

1. 1

   Accounting Standards and Financial Statements

   3 topics

   • Applicable Indian Accounting Standards
     • AS for inventories, revenue and depreciation
     • AS for fixed assets and borrowing costs
   • Financial Statements of Companies
     • Schedule III formats
     • Profit prior to incorporation
   • Cash Flow Statement (AS 3)
2. 2

   Accounting for Specific Entities

   4 topics

   • Partnership Accounts
     • Admission, retirement and death of a partner
     • Dissolution and piecemeal distribution
   • Branch and Departmental Accounts
   • Insurance Claims for Loss of Stock and Profit
   • Accounting for Insurance and Banking Companies
3. 3

   Cost Accounting: Elements of Cost

   3 topics

   • Material Cost
     • Inventory control techniques: EOQ, ABC, level setting
     • Pricing of material issues: FIFO, LIFO, weighted average
   • Labour Cost
     • Time and piece rate systems
     • Incentive schemes; labour turnover
   • Overheads
     • Allocation, apportionment and absorption
     • Under/over absorption of overheads
4. 4

   Costing Methods and Systems

   4 topics

   • Job, Batch and Contract Costing
   • Process Costing
     • Normal and abnormal loss/gain
     • Equivalent production
   • Operating (Service) Costing
   • Reconciliation of Cost and Financial Accounts

Intermediate: Financial and Cost Accounting flashcards for CMA (Cost & Management Accountancy)

24 of 51 cards from the Intermediate: Financial and Cost Accounting deck — real questions with worked answers.

1. Under AS 2 (Valuation of Inventories), at what value are inventories carried in the balance sheet?

   At the lower of cost and net realisable value (NRV). Cost includes purchase cost, conversion cost and other costs to bring inventory to its present location and condition.

2. How is Net Realisable Value (NRV) defined under AS 2?

   $$NRV = \text{Estimated selling price} - \text{Estimated costs of completion} - \text{Estimated costs necessary to make the sale}$$

3. Which cost formulas for assigning cost to inventory are permitted under AS 2, and which is prohibited?

   Permitted: Specific identification (for non-interchangeable items), FIFO, and Weighted Average. LIFO is NOT permitted under AS 2.

4. Under AS 9 (Revenue Recognition), when is revenue from the sale of goods recognised?

   When the seller has transferred to the buyer the property in the goods (significant risks and rewards of ownership), no significant uncertainty exists regarding the consideration, and it is reasonable to expect ultimate collection.

5. Under AS 9, how is revenue from rendering of services recognised?

   By the proportionate completion method or the completed service contract method, depending on the nature of the service and as performance is achieved.

6. List the items specifically excluded from the scope of revenue under AS 9.

   Revenue arising from construction contracts, hire-purchase and lease agreements, government grants and similar subsidies, and revenue of insurance companies from insurance contracts.

7. What are the two main methods of providing depreciation under AS 6 / AS 10?

   The Straight Line Method (SLM) and the Written Down Value (WDV) / Reducing Balance Method.

8. State the Straight Line Method (SLM) formula for annual depreciation.

   $$\text{Depreciation} = \frac{\text{Cost} - \text{Residual Value}}{\text{Useful Life (years)}}$$

9. Under the Written Down Value method, how is the annual depreciation rate computed?

   $$r = \left(1 - \sqrt[n]{\frac{S}{C}}\right) \times 100$$ where $C$ = cost, $S$ = scrap value, and $n$ = useful life in years.

10. Under AS 10 (Property, Plant and Equipment), what costs are included in the initial cost of a fixed asset?

    Purchase price (net of trade discounts/rebates) plus all directly attributable costs of bringing the asset to its working condition and location, plus the initial estimate of dismantling/restoration costs.

11. Under AS 16, which borrowing costs may be capitalised?

    Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of its cost; all other borrowing costs are charged to expense in the period incurred.

12. What is a 'qualifying asset' under AS 16 (Borrowing Costs)?

    An asset that necessarily takes a substantial period of time to get ready for its intended use or sale.

13. Under AS 16, when does capitalisation of borrowing costs cease?

    When substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete. Capitalisation is suspended during extended periods in which active development is interrupted.

14. What is the prescribed format for the Balance Sheet and Statement of Profit and Loss of a company in India?

    Schedule III to the Companies Act, 2013 prescribes the formats. The Balance Sheet is in vertical form; the Statement of Profit and Loss is also vertical.

15. Under Schedule III, what are the two broad heads on the Equity & Liabilities side of the Balance Sheet?

    (1) Equity and Liabilities is split into Shareholders' Funds, Share application money pending allotment, Non-current liabilities and Current liabilities. (2) Assets are split into Non-current assets and Current assets.

16. Under Schedule III, how is an operating cycle used to classify assets and liabilities?

    An asset/liability is 'current' if it is expected to be realised/settled within the operating cycle or within 12 months from the reporting date; otherwise it is non-current. Where the operating cycle cannot be identified, it is assumed to be 12 months.

17. What is 'profit prior to incorporation'?

    The profit earned by a business between the date of purchase (effective date of takeover) and the date the company is legally incorporated. It is a capital profit, not available for dividend, and is transferred to Capital Reserve.

18. How is profit prior to incorporation usually apportioned between pre- and post-incorporation periods?

    Gross profit/sales-related items in the ratio of sales (or time, as appropriate); time-based fixed expenses (rent, salaries) in the time ratio; and certain expenses (e.g., directors' fees, partners' salary) wholly to the relevant period.

19. Under AS 3, what are the three categories into which cash flows are classified in a Cash Flow Statement?

    Operating activities, Investing activities, and Financing activities.

20. Under AS 3, what are the two methods of presenting cash flows from operating activities?

    The Direct Method (gross cash receipts and payments) and the Indirect Method (net profit adjusted for non-cash items, deferrals/accruals and items of investing/financing).

21. Define 'cash equivalents' as per AS 3.

    Short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value (generally with original maturity of three months or less).

22. In the absence of a partnership deed, at what rate is interest on a partner's loan to the firm allowed?

    $6\%$ per annum. (No interest on capital, no interest on drawings, no salary; profits/losses shared equally.)

23. What is the formula for the gaining ratio of a partner?

    $$\text{Gaining Ratio} = \text{New Ratio} - \text{Old Ratio}$$ It is computed when a partner retires or dies and the remaining partners acquire the outgoing partner's share.

24. What is the sacrificing ratio and when is it used?

    $$\text{Sacrificing Ratio} = \text{Old Ratio} - \text{New Ratio}$$ It is used on the admission of a partner to determine the proportion in which old partners give up share, and to distribute the incoming partner's goodwill premium.

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