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MANAGEMENT ACCOUNTING STUDY TEXT
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MANAGEMENT ACCOUNTING 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: - Estim...

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  • April 11, 2024
  • 307
  • 2023/2024
  • Exam (elaborations)
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  • management accounting study text

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  • CPA
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CPA
PART 1
Section 2



MANAGEMENT ACCOUNTING


STUDY TEXT

KASNEB JULY 2018 SYLLABUS
Revised on: January 2019

, MANAGEMENT ACCOUNTING

MANAGEMENT ACCOUNTING

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

1. 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

2. 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; For decision making

3. Cost estimation

- Meaning of cost estimation
- Methods of estimating cost; non-mathematical methods like engineering method,
accounts analysis method and high-Iow method; mathematical methods like scatter
graph method, OLS regression method (simple linear regression only)

4. 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

Page 2

, MANAGEMENT ACCOUNTING

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

5. Cost bookkeeping

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

6. Costing methods

- Job order costing
- Batch costing
- Process costing (including work in progress; joint and by-products)
- Service costing
- Unit costing

7. 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

8. Activity Based Costing

- Meaning of ABC
- Types of activities
- Overhead absorption rates
- Income statements

9. 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

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, MANAGEMENT ACCOUNTING



10. 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 and efficiency variances

11. Cost management

- Value chain-research and development-design-production-marketing distribution and
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

12. Emerging issues and trends




CONTENT PAGE

Topic 1: Nature and purpose of cost and management accounting……………………..…….5
Topic 2: Cost classification…………………………………………………………………...25
Topic 3: Cost estimation…………………………………………………………………...…34
Topic 4: Accounting for material, labour and overheads…………………………………..…50
Topic 5: Cost bookkeeping……………………………………………………………..……127
Topic 6: Costing methods........................................................................................................147
Topic 7: Marginal and absorption costing...............................................................................187
Topic 8: Activity Based Costing..............................................................................................228
Topic 9: Budgeting and budgetary control..............................................................................235
Topic 10: Standard costing......................................................................................................266
Topic 11: Cost management....................................................................................................299
Topic 12: Emerging issue and issues




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