Cost Accounting and Financial Management

CA PE-II : Group II :: Paper 4 : [One paper: Three hours - 100 marks]

Level of Knowledge : Working knowledge.

Objectives . . .

  1. To gain understanding of costing concepts and the detailed procedure and documentation involved in cost ascertainment systems.
  2. To gain understanding of the various basic concepts of decision-making process in financial management.

Contents . . .

Section - A: Cost Accounting [60 Marks]

  1. Objectives, Importance and Advantages of Cost Accounting, cost concepts; Types of costing; Installation of a costing system; Essentials of a good Cost Accounting system; Difference between Cost Accounting and Financial Accounting; Elements of cost; Cost unit, Cost centre and Profit centre.
  2. Cost ascertainment:
    1. Material accounting:
      1. Procurement procedures; Store procedures and Documentation in respect of receipts, Issues of stock, Stock verification.
      2. Inventory control; Conventional techniques such as fixing of minimum/maximum and re-order levels.
      3. Valuation of receipts, issues of inventories.
      4. Consumption; Identification with products of cost centers; Basis for consumption entries in financial ac-counts; Monitoring consumption.
    2. Employee-related cost:
      1. Attendance and Payroll procedures; Overview of statutory requirements; Overtime and incentives.
      2. Utilisation of labour; classification into direct and indirect as demanded by circumstances of the unit identifying with cost centers; labour booking procedures; identifying labour hours with work-orders or batches or capital jobs or overhead work-orders; absorption rates.
      3. Efficiency rating procedures.
    3. Direct expenses:
      Sub-contracting; Control on material movements; identification with the main product or ser-vices; Documentation requirements.
    4. Overheads:
      1. Functional analysis; Factory Administration, Selling, Distribution, Research and development. Behavioural analysis; Fixed, Variable, Semi-variable.
      2. Factory overheads; Primary allocation to all cost centers; Secondary allocation of service/utility cost centersto production cost centers; Criteria for choosing suitable basis for allotment; Activity-based cost allocations; Capacity cost adjustments; Fixed absorption rates for absorbing overheads to products or services.
      3. Administration overheads; Activity analysis for control; Method of allocation to cost centers or products.
      4. Selling and distribution overheads; Analysis and absorption of the expenses in products/customers; Impact of marketing strategies; Cost effectiveness of various methods of sales promotion; Segment-wise/customer-wise/region-wise cost analysis.
  3. Methods of costing: Job/Contract costing system; Process costing system; operating costing system.
  4. Cost accounts systems, Cost control accounts (non-integrated accounts), Reconciliation of cost and financial accounts.
  5. General introduction to Cost Accounting records and rules (industry-wise details are not expected).
  6. Cost system installation and operation; Structuring the organisation into cost/activity centers; criteria and purpose.
  7. Product cost sheets:
    1. Valuation of work-in-progress; Procedures in Job order method and in Process costing.
    2. Profitability statements; Product-wise/ segment-wise/ customer-wise profitability.
  8. Uniform costing and inter-firm comparison.
  9. Cost Reduction.

Recommended Books

  • Suchitra Prakashan Pvt. Ltd.
    1. Cost Accounting for C A
      • Dr. N.K. Agrawal
  • Mahavir Publications
    1. Cost Accounting (Problem and Theory)
      • SN. Maheshwari
  • Academic Publisher (Calcutta)
    1. Cost Accounting (Methods & Problems)
      • B.K. Bhar
  • A. H. Wheeler publisher
    1. Principles and Practices of Cost Accounting
      • Ashish K. Bhattacharya

Other Relevant Books

Section - B: Financial Management [40 Marks]

  1. Meaning, Importance and Objectives of Financial Management; Time value of money; Conflicts in profit versus value maximisation principle; Functions of chief financial officer.
  2. Tools of Financial Analysis and Planning; Ratio Analysis to evaluate performance and financial health; Application of ratio analysis in financial decision-making; Analysis of cash flow and Funds Flow statements.
  3. Management of working capital; Cash and Marketable securities management; Treasury management, Receivables management, Inventory management, Financing of working capital.
  4. Investment decisions: Capital budgeting; Techniques for evaluation like payback method, accounting rate of return, Internal rate of return, Net present value and Profitability index - simple problems; Relationship between risk and re-turn.
  5. Financing decisions: Cost of capital; Cost of different sources of finance, Weighted average cost of capital, Marginal cost of capital; Concepts of operating and financial leverage; Capital structure patterns; Designing optimum capital structure; Constraints; Various capital structure theories; Different sources of finance: Long, medium, and Short-term finance.

Recommended Books

  • Prentice Hall of India Pvt. Ltd., New Delhi
    1. Financial Management and Policy
      • Van Home and C. James
  • Sultan Chand & Sons
    1. Management Accounting & Financial Analysis
      • SN. Maheshwari
  • Tata McGraw Hill Publishing Co. Ltd.
    1. Financial Management Text & Problems
      • M.Y. Khan & P.K. Jam
  • Tata McGraw Hill Book Co.
    1. Financial Management Theory and Practice
      • Prasanna Chandra
  • Chaitanya Publishing House
    1. Financial Management An Analytical and Conceptual Approach
      • S.C. Kuchhal
  • Vikas Publishing House Pvt. Ltd.
    1. Financial Management
      • IM. Pandey
  • Galgotia Publiishing Company ()New Delhi)
    1. Principles of Financial Management
      • R.P. Rastogi

Other Relevant Books

© Krishbhavara ♣