Management Accounting KASNEB Notes

Download Management Accounting KASNEB Notes

CPA INTERMEDIATE LEVEL

COURSE OUTLINE

GENERAL OBJECTIVE

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

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
  • Analyse variances for decision making
  • Use computers in cost management.

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; behavioural classification; controllability; time; financial accounting; identification with inventory; for decision making

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 (simple linear regression only)

Accounting, for material, labour and overheads

  • Accounting for materials and inventory; material cost records, purchasing procedures, receipt and issues of material, methods of valuing material issues, inventory control procedures; economic order quantity (EOQ) and economic batch quantity(EBQ) models and back flush
  • Accounting   for   labour:    Methods    of   labour   remuneration,    labour    control procedures, maintenance of labour records
  • Accounting for overheads: Types of overheads, manufacturing, distribution and administration, service 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 (including work in progress; joint and by-products)
  • Service costing
  • Unit costing

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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
  • Applications of marginal costing: break-even analysis and charts (single product)
  • Simplified decision problems; accept or reject, special order, dropping a product, make or buy
  • Operating statements

Activity based costing

  • Meaning of ABC
  • Types of activities
  • Overhead absorption rates
  • Incomes statement

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
  • Distinction between budgeting and budgetary control in the private and public sectors

Standard costing

  • Types of standards
  • Principles of setting standards
  • Standard cost card
  • Behavioural aspects of standard costing
  • Generation of standard cost information
  • Materials, labour and overheads variances; price ,efficiency mix and yield variances

Cost management

  • Value chain-research    and    development;    design;     production;    marketing distribution; customer care
  • Just in time (JIT)
  • Use of computers in costing; job costing, inventory management,  labour  costing, cost entre analysis, coding, budgeting and decision making

Emerging issues and trends

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