Fundamentals of Management Accounting – KASNEB Syllabus

PAPER 10: FUNDAMENTALS OF MANAGEMENT ACCOUNTING

GENERAL OBJECTIVE

This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her to apply the fundamental principles of management accounting in decision making.

LEARNING OUTCOMES

A candidate who passes this paper should be able to:

  • Estimate the cost of goods and services
  • Analyse product costs for manufacturing and non-manufacturing activities
  • Prepare marginal and absorption cost statements
  • Analyse an organisation’s activities through budgetary control process
  • Use computers in cost

CONTENT

Nature and purpose of cost and management accounting

  • The nature of cost accounting and costing terms
  • The role of cost accounting in management
  • The purposes of cost accounting information
  • Scope of cost accounting
  • Meaning of management accounting, scope, limitations, applications
  • Relationship between cost, financial and management accounting
  • Selection of an ideal cost accounting system

Cost classification

–           Definition and purpose of cost classification

–           Methods of cost classification: By nature/elements of manufacturing costs; Functional classification; Behavioral classification; Controllability; Time; Financial accounting; Identification with inventory

Cost estimation

  • Meaning of cost estimation
  • Methods of estimating cost; non-mathematical methods like engineering method, accounts analysis method and high-low method; mathematical methods like scatter graph method, OLS regression method

Cost accumulation

  • Accounting for materials and inventory; material cost records, purchasing procedures, receipt and issues of material, methods of valuing material issues, stock control procedures
  • Accounting for labour: methods of labour remuneration, labour control procedures, maintenance of labour records
  • Accounting for overheads: types of overheads, manufacturing, distribution and administration, departmental cost allocation and apportionment, overheads analysis, overhead absorption rates, over or under absorption
  • Accounting for materials and inventory; material cost records, purchasing procedures, receipt and issues of material, methods of valuing material issues, stock control procedures
  • Accounting for labour: methods of labour remuneration, labour control procedures, maintenance of labour records
  • Accounting for overheads: types of overheads, manufacturing, distribution and administration, departmental cost allocation and apportionment, overheads analysis, overhead absorption rates, over or under absorption

Cost bookkeeping

  • The flow of costs in a business enterprise
  • Cost bookkeeping- interlocking and integrated ledger systems

Costing methods

  • Job order costing
  • Batch costing
  • Process costing (excluding work in progress, joint and by-products)
  • Service costing
  • Unit costing

Marginal and absorption costing

  • Distinction between marginal and absorption costing, valuation of products under marginal and absorption costing
  • Preparation of marginal and absorption statements; cost of production and profit determination
  • Reconciliation of marginal profits and absorption profits, application of marginal costing: break-even analysis and charts (single product), simplified decision problems; accept or reject, special order, dropping a product, make or buy and choice of a product where a limiting factor exists

Budgeting and budgetary control

  • Nature and purposes of budgets
  • Preparation of budgets; master budgets, functional (department budgets, cash budgets), proforma financial reports (income statements and balance sheets)
  • Purpose of budgetary control; Operation of a budgetary control system, organisation and coordination of the budgeting function

Emerging issues and trends



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