Cost and Management Accounting

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2 Paper 2 Cost and Management Accounting Syllabus... Q&A-2.2 Bird's-Eye View... Q&A-2.5 Line Chart Showing Relative Importance Chapters... Q&A-2.7 Table Showing Importance of Chapter on the Basis of Marks... Q&A-2.8 Table Showing Importance of Chapter on the Basis of Marks of Compulsory Questions... Q&A-2.9 Legends for the Graphs... Q&A-2.10 Study Material Based Contents 1 Lesson 1 Introduction to Cost and Management Accounting... Q&A Lesson 2 Material Cost... Q&A Lesson 3 Labour Cost... Q&A Lesson 4 Direct Expenses and Overheads... Q&A Lesson 5 Activity Based Costing (ABC)... Q&A Lesson 6 Cost Records - I (Integrated & Non-Integrated Accounts) Q&A Lesson 6 Cost Records - II (Reconciliation of Cost and Financial Accounts)... Q&A Lesson 7 Costing Systems - I (Unit and Output Costing, Job Costing & Batch Costing)... Q&A Lesson 7 Costing Systems - II (Contract and Process Costing) Q&A Lesson 7 Costing Systems - III (Service Costing / Operating Costing)... Q&A Lesson 8 Marginal Costing... Q&A Lesson 9 Standard Costing and Variance Analysis... Q&A Lesson 10 Budget, Budgeting and Budgetary Control... Q&A Lesson 11 Cost Accounting Records and Cost Audit... Q&A Lesson 12 Analysis & Interpretation of Financial Statements - I Q&A Lesson 12 Analysis & Interpretation of Financial Statements - II (Cash Flow Statement)... Q&A Lesson 12 Analysis & Interpretation of Financial Statements - III (Fund Flow Statement)... Q&A Objective Questions... Q&A Basic Formula Q&A Q&A-2.1

3 Syllabus Paper 2 Cost and Management Accounting (100 marks) Level of knowledge: Working knowledge. Objective: To acquire knowledge and understanding of the concepts, techniques and practices of cost and management accounting and to develop skills for decision making. Detailed Contents 1. Introduction to Cost and Management Accounting Cost Accounting: Evolution, Meaning, Objectives and Scope Concepts of Costs, Classifications and Elements of Cost Cost Centre and Cost Unit Methods and Techniques of Costing Cost Accounting Standards Installation of a Costing System Practical Difficulties in Installing a Costing System Role of Cost Accountant in Decision Making Management Accounting: Evolution, Meaning, Objectives and Scope Tools and Techniques of Management Accounting Relationship of Cost Accounting, Financial Accounting, Management Accounting and Financial Management Conflicts in Profit versus Value Maximisation Principle Role of Management Accountant in Decision Making 2. Material Cost Materials Control - Concept and Techniques Procurement Procedures and Documentation: Methods of Purchasing; Procedure of Purchases, Stores and Issue of Material; Stock Verification Methods of Pricing of Material: FIFO, LIFO, Simple Average, Weighted Average Accounting and Control of Material Losses, Wastage, Scrap, Spoilage and Defectives Inventory Management: Techniques of fixing of minimum, maximum and reorder levels, Economic Order Quantity, ABC Analysis; Stock Verification and Perpetual Inventory 3. Labour Cost Meaning and Classification of Labour Costs Accounting and Control of Labour Costs Q&A-2.2

4 Time Keeping and Time Booking Attendance and Payroll Procedures, Time Recording, Overtime and Idle Time Labour turnover and Remedial Measures Efficiency Rating Procedures; Remuneration Systems and Incentive Schemes 4. Direct Expenses and Overheads Direct Expenses: Meaning, Nature, Collection, Classification and Treatment of Direct and Indirect Expenses Overheads: Meaning, Nature, Collection and Classification Functional Analysis: Factory, Administration, Selling, Distribution, Research and Development Behavioural Analysis: Fixed, Variable, Semi variable and Step Cost Allocation, Apportionment, Absorption and Control of Overheads Preparation of Cost Sheet 5. Activity Based Costing (ABC) Meaning, Importance, Characteristics Elements and Steps involved ABC vs. Traditional Costing Uses and Limitations 6. Cost Records Cost Ledgers - Integrated Accounts and Non-Integrated Accounts Reconciliation of Cost and Financial Accounts 7. Costing Systems Unit and Output Costing Job Costing: Job Cost Cards, Collecting Direct Costs, Allocation of Overheads and its Applications Batch Costing: Features and Applications Contract Costing: Features, Distinction between Job and Contract Costing, Progress Payments, Retention Money, Escalation Clause, Contract Accounts, Accounting for Material, Accounting for Plant Used in a Contract, Contract Profit and Accounting Entries Process Costing: Features, Applications and Types of Process Costing, Process Loss, Abnormal Gains and Losses, Equivalent Units, Inter-Process Profit, Joint Products, By-Products and Accounting Service Costing: Features and Applications, Unit Costing and Multiple Costing, Application, Identification of Cost Unit and Cost Determination and Control 8. Marginal Costing Meaning, Advantages, Limitations and Applications Breakeven Analysis Cost-Volume Profit Analysis P/V Ratio and its Significance Q&A-2.3

5 Margin of Safety Absorption Costing: System of Profit Reporting and Stock Valuation Difference between Marginal Costing and Absorption Costing Income Measurement under Marginal Costing and Absorption Costing 9. Standard Costing Definition, Significance and Applications Various Types of Standards Installation of Standard Costing System-for Material, Labour, and Overhead Variance Analysis for Materials, Labour and Overheads and Accounting Treatment of Variances Benchmarking for Setting of Standards Variance Reporting to Management 10. Budget, Budgeting and Budgetary Control Budget Concept, Manual Fixed and Flexible Budgets Preparation and Monitoring of Various Types of Budgets Budgetary Control System: Advantages, Limitations and Installation Zero Base Budgeting Programme and Performance Budgeting 11. Cost Accounting Records and Cost Audit Nature and Scope of Cost Audit Cost Accounting Records and Cost Audit under Companies Act, 1956 Purpose, Scope and Advantages of Cost Audit Implementing Authorities of Cost Audit Cost Audit Techniques and Programmes Cost Audit Report Cost Auditor - Appointment, Rights and Responsibilities 12. Analysis and Interpretation of Financial Statements Financial Statements: Nature, Attributes, Objectives, Importance, Limitations Recent Trends in presenting Financial Statements Financial Statements Analysis: Types, Methods, Objectives, Limitations Ratio Analysis: Accounting, Uses, Classification, Advantages, Limitations Cash Flow Statement Fund Flow Statement Difference between Cash Flow and Fund Flow Statement Management Reporting Q&A-2.4

6 Bird's-Eye View Paper 2 Cost and Management Accounting Question Paper Based Contents of Last Five Examination Years Q. No. Chapter Page No. Name No Dec (a) (c) 8. (a) (c) Objective Questions Analysis & Interpretation of Financial Statements - II (Cash Flow Statement) Introduction to Cost and Management Accounting Material Cost Marginal Costing Direct Expenses and Overheads Budget, Budgeting and Budgetary Control June 2011 Dec (a)(i) (ii) (iii) 7. (a)(i) (ii) (iii) (c) 8. (a) (c) (a) 7. (a) (c) 8. (a) Objective Questions Introduction to Cost and Management Accounting Material Cost Labour Cost Analysis & Interpretation of Financial Statements - II (Cash Flow Statement) Budget, Budgeting and Budgetary Control Marginal Costing Costing Systems - II (Contract and Process Costing) Analysis & Interpretation of Financial Statements - I Introduction to Cost and Management Accounting Labour Cost Direct Expenses and Overheads Material Cost Objective Questions Analysis & Interpretation of Financial Statements - II (Cash Flow Statement) Material Cost Labour Cost Budget, Budgeting and Budgetary Control " " Analysis & Interpretation of Financial Statements - I Marginal Costing Q&A-2.5

7 2012 June 2012 Dec (a) (c) 7. (a) 8. (a) (c) (a) 7. (a) 8. (a) (c) Objective Questions Material Cost Costing Systems - II (Contract and Process Costing) Labour Cost Analysis & Interpretation of Financial Statements - II (Cash Flow Statement) Marginal Costing Analysis & Interpretation of Financial Statements - I Budget, Budgeting and Budgetary Control " " Objective Questions Analysis & Interpretation of Financial Statements - I Budget, Budgeting and Budgetary Control Costing Systems - II (Contract and Process Costing) Material Cost Analysis & Interpretation of Financial Statements - II (Cash Flow Statement) Marginal Costing Introduction to Cost and Management Accounting Q&A-2.6

8 Line Chart Page Q&A-2.7

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11 Legends for the Graphs Short Notes Distinguish Between Descriptive Practical Q&A-2.10

12 1 Introduction to Cost and Management Accounting Concept of Cost; Evolution of Cost Accounting Costing, Cost Accounting and Cost Accountancy Objectives, Importance and Scope of cost accounting Classifications and Elements of Cost; Cost Centre and Cost Unit Methods and Techniques of Costing Cost Accounting Standards Installation of a Costing System Practical Difficulties in Installing a Costing System Role of Cost Accountant in Decision Making This Chapter Includes Management Accounting and its evolution, Meaning, Objectives, Nature and Scope Tools and Techniques of Management Accounting Relationship of Cost Accounting, Financial Accounting, Management Accounting and Financial Management Limitations of Management Accounting Conflicts in Profit versus Value Maximisation Principle Role of Management Accountant in Decision Making. Marks of Short Notes, Distinguish Between, Descriptive & Practical Questions Q&A-2.11

13 Q&A-2.12 O Solved Scanner CS Executive Programme M-I Paper 2 CS Executive Programme (Module I) OBJECTIVE QUESTIONS Dec [5] {C} (a) State, with reasons in brief, whether the following statements are true of false : (i) Cost accounting is a branch of financial accounting. (2 marks) Choose the most appropriate answer from the given options in respect of the following : (iii) The type of process loss that should not affect the cost of inventories is (a) Abnormal loss Normal loss (c) Seasonal loss (d) Standard loss. (1 mark) (c) Re write the following sentences after filling up the blank spaces with appropriate word (s)/ figure (s) : (i) Cost is a fact whereas price is a. (ii) Imputed costs are relevant for. (iii) A is the cost that has already been incurred and cannot be avoided by decisions taken in the future. (v) A profit centre is a division or organisational unit concerned with controlling both and costs. (1 mark each) Answer : (a) (i) False; (iii) (a) Abnormal loss (c) (i) policy; (ii) decision making; (iii) sunk cost; (v) sales / (revenue); June [5] {C} (a) State, with reasons in brief, whether the following statements are true or false : (ii) Fixed cost per unit remains fixed. (iv) Rent on owned building is included in cost accounts. (2 marks each) Re-write the following sentences after filling-in the blank spaces with appropriate word(s)/figures(s) : (ii) Abnormal wastage part of cost of production.

14 [Chapter 1] Introduction to Cost and Management... O Q&A-2.13 (iv) Direct material + direct labour + factory overheads =. (1 mark each) Answer : (a) (ii) False : It is the total fixed cost which remains fixed inspective of the level of output. But, the fixed cost per unit will be different at different level of output. As level of output increases the fixed cost per unit will decrease and the level of output decreases the fixed cost per unit will increases. (iv) True: Rent on owned building is included in cost accounts, it is done to calculate the real cost after taking into account the national rent which would have been paid, has the building been taken on rent. (ii) is not (iv) Factory cost/works cost Dec [5] {C} (a) State, with reasons in brief, whether the following statements are correct or incorrect : (i) All long-term costs are controllable. (ii) Rent on own building is not included in cost accounts. (2 marks each) Choose the most appropriate answer from the given options in respect of the following : (iii) Non-controllable cost is the cost which (a) Is not subject to control at any level of managerial supervision Cannot be controllable during a particular financial year (c) Cannot be controllable at any cost (d) None of the above. (1 mark) (c) Re-write the following sentences after filling-in the blank spaces with appropriate word(s)/figure(s) : (v) is the allotment of proportion of items of cost to cost centre/cost units. (1 mark) Answer: (a) (i) Correct : Normally, in short run all variable cost are controllable and all fixed cost are not controllable whereas in long run/terms all cost whether variable or fixed cost are controllable. (ii) Correct : For decision making, point of view rent on own building is very important. Whether it is not recorded in the book and also important in comparing alternatives. This cost is treated as imputed or national costs and do not enter into traditional accounting systems. (iii) (a) (c) (v) Apportionment June [5] {C} (a) State, with reasons in brief, whether the following statements are correct or incorrect: (iv) A profit centre whose performance is measured by its return on investment (ROI)

15 Q&A-2.14 O Solved Scanner CS Executive Programme M-I Paper 2 is known as investment centre. (2 marks) Choose the most appropriate answer from the given options in respect of the following: (iv) Fixed costs remain fixed (a) Over a short period Over a long period and within relevant range (c) Over a short period and within a relevant range (d) Over a long period. (1 mark) (c) Re-write the following sentences after filling-in the blank spaces with appropriate word(s)/figure(s): (i) expenses are excluded from cost. (1 mark) Answer : (a) (iv) This statement is Correct : Reason :- In investment centre, it is the responsibility of the manager to earn a satisfactory return on the assets employed in his responsibilities centre which is govern by ROI. (iv) (c) (c) (i) Notional Dec [5] {C} (a) State, with reasons in brief, whether the follower statements are true or false : (iv) Opportunity cost is recorded in the books of account. (2 marks) Choose the most appropriate answer from the given options in respect of the following : (v) The management accounting is an extension of (a) Financial accounting Responsibility accounting (c) Cost accounting (d) All of the above. (1 mark) (c) Re-write the following sentences after filling-in the blank spaces with appropriate word(s)/figure(s) : (iv) costs are not useful for decision making as all past costs are irrelevant. (1 mark) Answer : (a) (iv) False: Opportunity cost is not recorded in the books of account, even though it is considered for decision making. Opportunity cost is the benefit foregone which would have been received had it been used for second best use. (v) (d) All of the above.

16 Solved Scanner CS Professional Programme Drafting Appearances and Pleadings Paper 2 Dec % OFF Publisher : Shuchita Prakashan ISBN : Author : Dr. Arun Kumar, CS (Dr.) Himanshu Srivastava Type the URL : 2 Get this ebook