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Q&A-2.1
Paper 2 Cost and Management Accounting
Syllabus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Q&A-2.2
Bird's-Eye View . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Q&A-2.5
Line Chart Showing Relative Importance Chapters . . . . . . . . . . . . . . Q&A-2.7
Table Showing Importance of Chapter on the Basis of Marks . . . . . . Q&A-2.8
Table Showing Importance of Chapter on the Basis of Marks
of Compulsory Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Q&A-2.9
Legends for the Graphs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Q&A-2.10
Study Material Based Contents
1 Lesson 1 Introduction to Cost and Management Accounting ........ Q&A-2.11
2 Lesson 2 Material Cost ................................................................... Q&A-2.33
3 Lesson 3 Labour Cost .................................................................... Q&A-2.62
4 Lesson 4 Direct Expenses and Overheads .................................... Q&A-2.79
5 Lesson 5 Activity Based Costing (ABC) ......................................... Q&A-2.97
6 Lesson 6 Cost Records - I (Integrated & Non-Integrated Accounts) Q&A-2.111
7 Lesson 6 Cost Records - II (Reconciliation of Cost and Financial
Accounts) ........................................................................ Q&A-2.124
8 Lesson 7 Costing Systems - I (Unit and Output Costing, Job
Costing & Batch Costing) ............................................... Q&A-2.139
9 Lesson 7 Costing Systems - II (Contract and Process Costing) Q&A-2.142
10 Lesson 7 Costing Systems - III (Service Costing / Operating
Costing) .......................................................................... Q&A-2.173
11 Lesson 8 Marginal Costing ............................................................ Q&A-2.180
12 Lesson 9 Standard Costing and Variance Analysis ...................... Q&A-2.217
13 Lesson 10 Budget, Budgeting and Budgetary Control .................... Q&A-2.237
14 Lesson 11 Cost Accounting Records and Cost Audit ...................... Q&A-2.261
15 Lesson 12 Analysis & Interpretation of Financial Statements - I Q&A-2.275
16 Lesson 12 Analysis & Interpretation of Financial Statements - II
(Cash Flow Statement) .................................................. Q&A-2.334
17 Lesson 12 Analysis & Interpretation of Financial Statements - III
(Fund Flow Statement) .................................................. Q&A-2.396
18 Objective Questions ....................................................... Q&A-2.426
Basic Formula Q&A-2.443
Q&A-2.2
Syllabus
Paper 2 (100 marks)Cost and Management Accounting
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.
Detailed 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 Accoun-
ting and Financial Management
• Conflicts in Profit versus Value Maximisation Principle
• Role of Management Accountant in Decision Making
2. Material Cost
• Materials Control - 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
• Meaning and Classification of Labour Costs
• Accounting and Control of Labour Costs
Q&A-2.3
• 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
4. Direct Expenses and Overheads
• Direct Expenses: Meaning, Nature, Collection, Classification and Treatment
of Direct and Indirect Expenses
• Overheads: Meaning, Nature, Collection and Classification Functional
Analysis: Factory, Administration, Selling, Distribution, Research and
Development
• Behavioural Analysis: Fixed, Variable, Semi variable and Step Cost
Allocation, Apportionment, Absorption and Control of Overheads
• Preparation of Cost Sheet
5. Activity Based Costing (ABC)
• Meaning, Importance, Characteristics
• Elements and Steps involved
• ABC vs. Traditional Costing
• Uses and Limitations
6. Cost Records
• Cost Ledgers - Integrated Accounts and Non-Integrated Accounts
• Reconciliation of Cost and Financial Accounts
7. Costing Systems
• Unit and Output Costing
• Job Costing: Job Cost Cards, Collecting Direct Costs, Allocation of Overheads
and its Applications
• Batch Costing: Features and Applications
• Contract Costing: Features, Distinction between Job and Contract Costing,
Progress Payments, Retention Money, Escalation Clause, Contract Accounts,
Accounting for Material, Accounting for Plant Used in a Contract, Contract
Profit and Accounting Entries
• Process Costing: Features, Applications and Types of Process Costing,
Process Loss, Abnormal Gains and Losses, Equivalent Units, Inter-Process
Profit, Joint Products, By-Products and Accounting
• Service Costing: Features and Applications, Unit Costing and Multiple
Costing, Application, Identification of Cost Unit and Cost Determination and
Control
8. Marginal Costing
• Meaning, Advantages, Limitations and Applications
• Breakeven Analysis
• Cost-Volume Profit Analysis
• P/V Ratio and its Significance
Q&A-2.4
• Margin of Safety
• Absorption Costing: System of Profit Reporting and Stock Valuation
• Difference between Marginal Costing and Absorption Costing
• Income Measurement under Marginal Costing and Absorption Costing
9. Standard Costing
• Definition, Significance and Applications
• Various Types of Standards
• Installation of Standard Costing System-for Material, Labour, and Overhead
• Variance Analysis for Materials, Labour and Overheads and Accounting
Treatment of Variances
• Benchmarking for Setting of Standards
• Variance Reporting to Management
10. Budget, Budgeting and Budgetary Control
• Budget Concept, Manual
• Fixed and Flexible Budgets
• Preparation and Monitoring of Various Types of Budgets
• Budgetary Control System: Advantages, Limitations and Installation
• Zero Base Budgeting
• Programme and Performance Budgeting
11. Cost Accounting Records and Cost Audit
• Nature and Scope of Cost Audit
• Cost Accounting Records and Cost Audit under Companies Act, 1956
• Purpose, Scope and Advantages of Cost Audit
• Implementing Authorities of Cost Audit
• Cost Audit Techniques and Programmes
• Cost Audit Report
• Cost Auditor - Appointment, Rights and Responsibilities
12. Analysis and Interpretation of Financial Statements
• Financial Statements: Nature, Attributes, Objectives, Importance, Limitations
• Recent Trends in presenting Financial Statements
• Financial Statements Analysis: Types, Methods, Objectives, Limitations
• Ratio Analysis: Accounting, Uses, Classification, Advantages, Limitations
• Cash Flow Statement
• Fund Flow Statement
• Difference between Cash Flow and Fund Flow Statement
• Management Reporting
Q&A-2.5
Bird's-Eye View
Paper 2
Cost and Management Accounting
Question Paper Based Contents of Last Five Examination
Years Q. No. Chapter Page
No.No. Name
2010
Dec.
5.
6.
7. (a)
(b)
(c)
8. (a)
(c)
18
16
1
2
11
4
13
Objective Questions
Analysis & Interpretation of Financial Statements - II
(Cash Flow Statement)
Introduction to Cost and Management Accounting
Material Cost
Marginal Costing
Direct Expenses and Overheads
Budget, Budgeting and Budgetary Control
432
340
19
40
188
83
247
2011
June
5.
6. (a)(i)
(ii)
(iii)
(b)
7. (a)(i)
(ii)
(iii)
(b)
(c)
8. (a)
(b)
(c)
18
1
2
3
16
13
11
9
15
1
3
4
2
Objective Questions
Introduction to Cost and Management Accounting
Material Cost
Labour Cost
Analysis & Interpretation of Financial Statements - II
(Cash Flow Statement)
Budget, Budgeting and Budgetary Control
Marginal Costing
Costing Systems - II (Contract and Process Costing)
Analysis & Interpretation of Financial Statements - I
Introduction to Cost and Management Accounting
Labour Cost
Direct Expenses and Overheads
Material Cost
434
17
37
66
345
240
184
144
284
19
68
86
41
2011
Dec.
5.
6. (a)
(b)
7. (a)
(b)
(c)
8. (a)
(b)
18
16
2
3
13
13
15
11
Objective Questions
Analysis & Interpretation of Financial Statements - II
(Cash Flow Statement)
Material Cost
Labour Cost
Budget, Budgeting and Budgetary Control
" "
Analysis & Interpretation of Financial Statements - I
Marginal Costing
436
347
42
69
248
241
286
189
Q&A-2.6
2012
June
5.
6. (a)
(b)
(c)
7. (a)
(b)
8. (a)
(b)
(c)
18
2
9
3
16
11
15
13
13
Objective Questions
Material Cost
Costing Systems - II (Contract and Process Costing)
Labour Cost
Analysis & Interpretation of Financial Statements - II
(Cash Flow Statement)
Marginal Costing
Analysis & Interpretation of Financial Statements - I
Budget, Budgeting and Budgetary Control
" "
438
42
146
67
349
190
288
242
242
2012
Dec.
5.
6. (a)
(b)
7. (a)
(b)
8. (a)
(b)
(c)
18
15
13
9
2
16
11
1
Objective Questions
Analysis & Interpretation of Financial Statements - I
Budget, Budgeting and Budgetary Control
Costing Systems - II (Contract and Process Costing)
Material Cost
Analysis & Interpretation of Financial Statements - II
(Cash Flow Statement)
Marginal Costing
Introduction to Cost and Management Accounting
440
290
244
147
44
350
192
20
Q&A-2.7
Line Chart Page
Q&A-2.10
Legends for the GraphsS
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Dis
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Be
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Q&A-2.11
1 Introduction to Cost and
Management Accounting
This Chapter Includes• Concept of Cost; • Evolution of Cost Accounting• Costing, Cost Accounting and Cost
Accountancy• Objectives, Importance and Scope of
cost accounting• 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 and itsevolution, Meaning, Objectives,Nature and Scope
• Tools and Techniques of Manage-ment Accounting
• Relationship of Cost Accounting,Financial Accounting, ManagementAccounting and Financial Manage-ment
• Limitations of Management Accoun-ting
• Conflicts in Profit versus ValueMaximisation Principle
• Role of Management Accountant inDecision Making.
Marks of Short Notes, Distinguish Between, Descriptive & Practical Questions
Q&A-2.12 O Solved Scanner CS Executive Program me M-I Paper 2
CS Executive Programme (Module I)
OBJECTIVE QUESTIONS
2008 - Dec [5] {C} (a) State, with reasons in brief, whether the following statements are
true of false :
(i) Cost accounting is a branch of financial accounting. (2 marks)
(b) Choose the most appropriate answer from the given options in respect of the
following :
(iii) The type of process loss that should not affect the cost of inventories is —
(a) Abnormal loss
(b) Normal loss
(c) Seasonal loss
(d) Standard loss. (1 mark)
(c) Re ! write the following sentences after filling !up the blank spaces with
appropriate word (s)/ figure (s) :
(i) Cost is a fact whereas price is a __________ .
(ii) Imputed costs are relevant for __________ .
(iii) A _______ is the cost that has already been incurred and cannot be avoided
by decisions taken in the future.
(v) A profit centre is a division or organisational unit concerned with controlling
both ______ and costs. (1 mark each)
Answer :
(a) (i) False;
(b) (iii) (a) Abnormal loss
(c) (i) policy;
(ii) decision making;
(iii) sunk cost;
(v) sales / (revenue);
2009 - June [5] {C} (a) State, with reasons in brief, whether the following statements
are true or false :
(ii) Fixed cost per unit remains fixed.
(iv) Rent on owned building is included in cost accounts. (2 marks each)
(b) Re-write the following sentences after filling-in the blank spaces with appropriate
word(s)/figures(s) :
(ii) Abnormal wastage_________ part of cost of production.
[Chapter # 1] Introduction to Cost and Management... O Q&A-2.13
(iv) Direct material + direct labour + factory overheads = _____. (1 mark each)
Answer :
(a) (ii) False : It is the total fixed cost which remains fixed inspective of the level of
output. But, the fixed cost per unit will be different at different level of output.
As level of output increases the fixed cost per unit will decrease and the level
of output decreases the fixed cost per unit will increases.
(iv) True: Rent on owned building is included in cost accounts, it is done to
calculate the real cost after taking into account the national rent which would
have been paid, has the building been taken on rent.
(b) (ii) is not
(iv) Factory cost/Works cost.
2009 - Dec [5] {C} (a) State, with reasons in brief, whether the following statements are
correct or incorrect :
(i) All long-term costs are controllable.
(ii) Rent on own building is not included in cost accounts. (2 marks each)
(b) Choose the most appropriate answer from the given options in respect of the
following :
(iii) Non-controllable cost is the cost which –
(a) Is not subject to control at any level of managerial supervision
(b) Cannot be controllable during a particular financial year
(c) Cannot be controllable at any cost
(d) None of the above. (1 mark)
(c) Re-write the following sentences after filling-in the blank spaces with appropriate
word(s)/figure(s) :
(v) ______is the allotment of proportion of items of cost to cost centre/cost units.
(1 mark)
Answer:
(a) (i) Correct : Normally, in short run all variable cost are controllable and all fixed
cost are not controllable whereas in long run/terms all cost whether variable or
fixed cost are controllable.
(ii) Correct : For decision making, point of view rent on own building is very
important. Whether it is not recorded in the book and also important in
comparing alternatives. This cost is treated as imputed or national costs and
do not enter into traditional accounting systems.
(b) (iii) (a)
(c) (v) Apportionment
2010 - June [5] {C} (a) State, with reasons in brief, whether the following statements
are correct or incorrect:
(iv) A profit centre whose performance is measured by its return on investment (ROI)
Q&A-2.14 O Solved Scanner CS Executive Program me M-I Paper 2
is known as investment centre. (2 marks)
(b) Choose the most appropriate answer from the given options in respect of the
following:
(iv) Fixed costs remain fixed—
(a) Over a short period
(b) Over a long period and within relevant range
(c) Over a short period and within a relevant range
(d) Over a long period. (1 mark)
(c) Re-write the following sentences after filling-in the blank spaces with appropriate
word(s)/figure(s):
(i) expenses are excluded from cost. (1 mark)
Answer :
(a) (iv) This statement is Correct :
Reason :- In investment centre, it is the responsibility of the manager to earn
a satisfactory return on the assets employed in his responsibilities centre which
is govern by ROI.
(b) (iv) (c)
(c) (i) Notional
2010 - Dec [5] {C} (a) State, with reasons in brief, whether the follower statements are
true or false :
(iv) Opportunity cost is recorded in the books of account. (2 marks)
(b) Choose the most appropriate answer from the given options in respect of the
following :
(v) The management accounting is an extension of !
(a) Financial accounting
(b) Responsibility accounting
(c) Cost accounting
(d) All of the above. (1 mark)
(c) Re-write the following sentences after filling-in the blank spaces with appropriate
word(s)/figure(s) :
(iv) ________costs are not useful for decision making as all past costs are
irrelevant. (1 mark)
Answer :
(a) (iv) False: Opportunity cost is not recorded in the books of account, even though
it is considered for decision making. Opportunity cost is the benefit foregone
which would have been received had it been used for second best use.
(b) (v) (d) All of the above.
Solved Scanner CS ProfessionalProgramme Drafting Appearances and
Pleadings Paper 2 Dec 2013
Publisher : Shuchita Prakashan ISBN : 9789350346006 Author : Dr. Arun Kumar, CS(Dr.) Himanshu Srivastava
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