Cost and Management Accounting - ICSI - Home

STUDY MATERIAL

EXECUTIVE PROGRAMME

COST AND MANAGEMENT

ACCOUNTING

MODULE 1

PAPER 2

ICSI House, 22, Institutional Area, Lodi Road, New Delhi 110 003

tel 011-4534 1000, 4150 4444 fax +91-11-2462 6727

email info@icsi.edu website icsi.edu

? THE INSTITUTE OF COMPANY SECRETARIES OF INDIA

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EXECUTIVE PROGRAMME

COST AND MANAGEMENT ACCOUNTING

Finance and accounting have assumed much importance in today¡¯s competitive world of business

wherein corporate organisations have to show the true and fair view of their financial position. Thus,

the application of accounting in the business sector has become an indispensable factor. Company

Secretary has to provide the complete and accurate information about the financial operations of the

company to management for decision making. This emphasises that the books of account are to be

maintained accurately, up-to-date and as per the norms.

The subject ¡®Cost and Management Accounting¡¯ is very important and useful for optimum

utilisation of existing resources. These are branches of accounting and had been developed due to

limitations of financial accounting. It is an indispensable discipline for corporate management, as the

information collected and presented to management based on cost and management accounting

techniques helps management to solve not only specific problems but also guides them in decision

making. Keeping in view the importance of this subject, various topics on Cost and Management

Accounting have been prescribed in the syllabus of CS Executive Programme with the objective of

acquainting the students with the basic concepts used in cost accounting and management

accounting having a bearing on managerial decision-making.

The entire paper has been discussed in twelve study lessons. In starting four study lessons we

have discussed about the basic of cost accounting, material, labour and overheads costing. Further

we have highlighted the concept of activity based costing, cost records, different costing systems.

Thereafter study focuses on the marginal costing, standard costing, budgeting & its applications for

decision making in business. At last we have discussed about cost accounting records, cost audit and

analysis & interpretation of financial statements.

In this study every efforts has been made to give a comprehensive coverage of all the topics

relevant to the subject. In all study lessons the requisite theoretical framework for understanding the

practical problems in the subject has been explained and wherever necessary practical illustrations

have been given to facilitate better understanding. At the end of each study lesson a brief about the

lesson have been given under the caption ¡®Lesson Round Up¡¯ as well a good blend of theoretical and

practical questions have been given under the caption ¡®Self Test Questions¡¯ for the practice of

students to test their knowledge. In fact, this being a practical paper, students need to have good

theoretical knowledge and practice to attain the requisite proficiency and confidence.

This study material has been published to aid the students in preparing for the Cost and

Management Accounting paper of the CS Executive Programme. It is part of the education kit and

takes the students step by step through each phase of preparation stressing key concepts, pointers

and procedures. Company Secretaryship being a professional course, the examination standards are

set very high, with emphasis on knowledge of concepts, applications, procedures and case laws, for

which sole reliance on the contents of this study material may not be enough.

Therefore, in order to supplement the information/contents given in the study material, students

are advised to refer to the Suggested Readings mentioned in the study material, e-bulletin, Business

Dailies and Journals.

In the event of any doubt, students may write to the Directorate of Academics and Professional

Development in the Institute for clarification at academics@icsi.edu.

(iv)

Although due care has been taken in publishing this study material yet the possibility of errors,

omissions and/or discrepancies cannot be ruled out. This publication is released with an

understanding that the Institute shall not be responsible for any errors, omissions and/or discrepancies

or any action taken in that behalf.

Should there be any discrepancy, error or omission noted in the study material, the Institute shall be

obliged if the same are brought to its notice for issue of corrigendum in the `e-bulletin¡¯.

The Institute has decided that the examination for this paper under new syllabus from December

2014 session in the Optical Mark Recognition (OMR) format, whereby students are required to answer

multiple choice question on OMR sheet by darkening the appropriate choice by HB Pencil. One mark

will be awarded for each correct answer. Negative marking for wrong answers attempted by the

candidates will be implemented w.e.f. December, 2015 session of examination in the ratio of 1:4, i.e.

deduction of one (1) mark for every four (4) wrong answers and total marks obtained by the

candidates in the paper would be rounded up to next whole number. Further, the negative marks

would be limited to the extent of marks secured for correct answers so that no candidate shall secure

less than zero mark.

The specimen OMR sheet is appended at the end of the study material. There is practice test

paper in the study to acquaint students with the pattern of examination. These are for practice purpose

only, not to be sent to the institute.

(v)

EXECUTIVE PROGRAMME

SYLLABUS

FOR

MODULE 1 - 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.

Detail 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

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2. Material Cost

? Materials Control ¨C 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

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Meaning and Classification of Labour Costs

Accounting and Control of Labour Costs

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

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