Friday, July 19, 2013

ICMAI - Intermediate Syllabus - Paper 8: Cost Accounting and Financial Management

Section A: Cost Accounting- Prime Costs & Overheads [60 marks]
1. General Purpose Cost Statement:
Cost Accounting Standards (CASs) (issued by the Institute of Cost Accountants of India from time to time), Generally Accepted Cost Accounting Principles (GACAP) – Purpose, Objective and Applicability
2. Business Process Analysis – Cost Centre and Cost Allocation
(a) Materials (CAS 6):
(i) Procurement of materials- classification and coding, inventory management and control, JIT (just in time), return to suppliers, pricing of receipts, Physical verification and related issues
(ii) Scrap, wastage, pilferage, obsolescence, normal loss, abnormal loss (CASs related to above items),framework
(b) Employee Costs (CAS 7):
(i) Employee routines, classification of Employee, time keeping, time booking, payroll preparation, disbursement of wages. Principles and methods of remuneration, Productivity Linked Incentive (PLI) Schemes
(ii) Accounting control and reporting, Accounting for Employee Cost, Computation of Employee Cost rates, Idle time, Overtime, Employee turnover, Employee cost reporting
(c) Direct expenses and problems connected therewith (CAS 10)
(d) Overhead (with reference to all Cost Accounting Standards related to Overhead):
(i) Classification of overheads; Overhead Cost Accounting
(ii) Accounting and control of overheads, computation of pre-determined overhead recovery rates, treatment of over and under absorption of overhead costs. Reports of control of overhead costs
(iii) Miscellaneous items of expenses – capacity costs, treatment of depreciation in costs

Note : All related further pronouncements of CASs will also be applicable

Section B : Financial Management [40 marks]
3. Overview of Financial Management
(a) Financial Management - meaning, objectives, scope, related finance disciplines, planning environment, key-decision areas
(b) Sources of Finance ( Shares, Debentures, Debt, Public Deposits, Lease Financing, etc); criteria for selecting sources of finance including finance for International Investments and Venture Capital Funds
(c) Other Financial services- Hire Purchase, Forfeiting, Bill Discounting, Factoring, Asset Securitization
(d) Financial Decision -Making - Emerging role of finance managers
(e) Compliance of regulatory requirements in formulation of financial strategies
(f) Role of Treasury Function in terms of setting Corporate objectives, Funds Management-National and International
(g) Contemporary developments - WTO, GATT, Corporate Governance, TRIPS,TRIMS,SEBI Regulations (as amended from time to time)
(h) Concepts of Value and Return – Time preference for money, Future Value, Present Value, Net Present Value (NPV)
4. Tools for Financial Analysis & Planning
(a) Funds flow and Cash flow Analysis
(b) Analysis Financial Ratio and Cash Flow Ratios - Ratios in the areas of performance, profitability, financial adaptability, liquidity, activity, shareholder investment and financing , interpretation of ratios and limitations of ratio analysis
(c) Identification of information required to assess financial performance, Effect of short –term debt on the measurement of gearing
5. Working Capital Management and Leverage Analysis
(a) Working Capital policies related to Inventory, Receivables, Payables, Cash and Marketable securities
(b) Financing of working capital
(c) Concepts and nature of Leverages, Analysis of Operating and Financial Leverages, Operating Risk and Financial Risk and Combined Leverages
(d) Operating leverages and Cost Volume Profit analysis-Earning Before Interest and Tax (EBIT) and Earning Per Share (EPS), Indifference point
6. Cost of Capital
(a) Meaning, Components, methods of determination of cost of capital related to debt, preference shares, equity shares, retained earnings, depreciation fund
(b) Capital Asset Pricing Models (CAPM)
(c) Weighted Average Cost of Capital and Marginal Cost of Capital
7. Capital Budgeting
(a) Purpose, objective, process
(b) Understanding different types of projects
(c) Techniques of decision making: non-discounted and discounted cash flow approaches – payback period method, accounting rate of return, net present value, internal rate of return, modified internal rate of return, discounted payback period and profitability index.
(d) Ranking of competing projects, ranking of projects with unequal lives.

(e) Modeling and forecasting cash flows and financial statements based on expected values for variables-economic and business