CMA Intermediate Financial Accounting Syllabus

Financial Accounting syllabus — full chapter and topic list

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

1. 1

   Introduction to Accounting

   3 topics

   • Meaning and Scope of Accounting
   • Accounting Principles
   • Accounting Standards
2. 2

   Preparation of Financial Statements

   2 topics

   • Profit and Loss Account
   • Balance Sheet
3. 3

   Accounting for Special Transactions

   3 topics

   • Consignment Accounts
   • Joint Venture Accounts
   • Hire Purchase and Installment Systems

Financial Accounting flashcards for CMA Intermediate

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

1. Define accounting as per the American Institute of Certified Public Accountants (AICPA).

   Accounting is the art of recording, classifying and summarising in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character, and interpreting the results thereof.

2. What are the four main functions/activities in the accounting process, in order?

   Recording (journalising), Classifying (ledger posting), Summarising (trial balance and financial statements), and Interpreting/Analysing the results.

3. Distinguish between Book-keeping and Accounting.

   Book-keeping is the routine, clerical recording and classifying of transactions (a part of accounting). Accounting is broader, including summarising, analysing, interpreting and communicating financial information for decision-making.

4. What is the basic accounting equation?

   Assets = Liabilities + Capital (Owner's Equity). Equivalently, Capital = Assets - Liabilities.

5. List the main branches/sub-fields of accounting.

   Financial Accounting, Cost Accounting, and Management Accounting (some also include Tax Accounting and Social Responsibility Accounting).

6. Who are the internal and external users of accounting information?

   Internal users: owners/management, employees. External users: investors, creditors/lenders, government and tax authorities, regulators, customers, and the public/researchers.

7. What is the difference between Accounting Concepts and Accounting Conventions?

   Concepts are basic assumptions/postulates on which accounting is based (e.g., entity, going concern). Conventions are customs/traditions guiding the preparation of accounts (e.g., conservatism, consistency, materiality).

8. State the Business Entity (Separate Entity) concept.

   The business is treated as a separate and distinct entity from its owners; only business transactions are recorded in the business books, and the owner is treated as a creditor (capital) to the extent of his investment.

9. State the Going Concern concept.

   It is assumed that the business will continue to operate for the foreseeable future and has no intention or necessity of liquidation; hence assets are recorded at cost and depreciated over useful life rather than at break-up value.

10. State the Money Measurement concept.

    Only transactions and events capable of being expressed in monetary terms are recorded in accounting; non-monetary facts (e.g., employee skill, management quality) are not recorded.

11. State the Cost (Historical Cost) concept.

    Assets are recorded in the books at their acquisition (purchase) cost, and this cost is the basis for all subsequent accounting (such as depreciation), not the market value.

12. State the Dual Aspect (Duality) concept.

    Every transaction has two aspects - a debit and a credit of equal amount - which is the foundation of the double-entry system and keeps the accounting equation in balance.

13. State the Accounting Period concept.

    The indefinite life of a business is divided into smaller, regular intervals (usually one year) called accounting periods, so that performance and position can be measured and reported periodically.

14. State the Matching concept.

    Expenses incurred in an accounting period should be matched with the revenues earned (recognised) in the same period to determine correct profit or loss.

15. State the Realisation (Revenue Recognition) concept.

    Revenue is recognised/recorded when it is earned (legal title or ownership passes/services are rendered), not necessarily when cash is received.

16. State the Accrual concept.

    Revenues and expenses are recorded when they are earned or incurred, regardless of when cash is actually received or paid.

17. State the convention of Conservatism (Prudence).

    Anticipate no profit but provide for all possible losses; account for all known liabilities and expected losses, but do not record anticipated gains until realised (e.g., closing stock at lower of cost or net realisable value).

18. State the convention of Materiality.

    Only items significant enough to influence the decisions of users need to be recorded and disclosed separately; insignificant items may be merged or treated in a convenient manner.

19. State the convention of Consistency.

    Accounting policies and methods should be applied uniformly from one period to another so that financial statements are comparable; any change should be disclosed.

20. What are Accounting Standards?

    Accounting Standards are written policy documents issued by an expert body (in India, ICAI/NFRA) covering recognition, measurement, presentation and disclosure of accounting transactions, to ensure uniformity, comparability and reliability of financial statements.

21. Which body issues Accounting Standards in India, and which authority notifies them for companies?

    The Institute of Chartered Accountants of India (ICAI) formulates them through its Accounting Standards Board; for companies they are notified by the Central Government on recommendation of the NFRA under the Companies Act, 2013.

22. What is the difference between Indian Accounting Standards (Ind AS) and AS?

    Ind AS are converged with IFRS and are mandatory for specified (mainly larger/listed) companies; AS are the older Indian standards still applicable to companies not covered by Ind AS and to non-corporate entities.

23. Which standard deals with Disclosure of Accounting Policies, and what are its three fundamental assumptions?

    AS 1 - Disclosure of Accounting Policies. The three fundamental accounting assumptions are Going Concern, Consistency, and Accrual.

24. Which Accounting Standard deals with Valuation of Inventories and what is its basic rule?

    AS 2 - Inventories should be valued at the lower of cost or net realisable value (NRV).

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