MANAGEMENT ACCOUNTANCY COURSE

 Papers and Syllabus

 A candidate for the Management Accountancy Examination shall be examined in the subjects comprised in following two groups:

 Group 1:        Paper 1- Management Accounting and Decision Making

                      Paper 2- Financial Management

Group II:        Paper 3- Economic Environment and General Management

                      Paper 4- Systems Management 

 Group –1

 Papers 1 & 2 – Objectives and Scope

Apart from the basic task of recording and analyzing monetary transaction, the accountant today has to use his specialized skills and training to assist management in planning, controlling and decision making.  The main objective of Papers 1 & 2 is to equip the candidates with technical and analytical skills in management of funds and managerial decision-making with special emphasis on the practical aspects.

In managerial decision making and control there can never be finality about the choice of a particular course of action from the many alternatives available. The candidate must, therefore, display an understanding of the relative merits if each alterative.

A candidate should be able to distinguish the relevant issues from the irrelevant matters, grasp the implication of the various factors in a given situation and marshal his thought process logically so as to be able to present information in a meaningful manner.  This examination does not purport to be a test of the computational and arithmetical ability of the candidates.  If the basic concepts of reporting to management are clearly brought out, minor arithmetical inaccuracies can be ignored.

Candidates may not e that mere theoretical knowledge by itself will not be enough. Practical experience gained during the day-to-day assignments must be used while attempting these papers.  The candidates must display in their answers an awareness of the problems faced by practicing managers.

Paper 1 – Management Accounting and Decision making

(a)  Management & Accounting Functions: Managerial Accounting –Managerial Planning and Control-Responsibility, Accounting-The control process-Accounting Analysis and special decisions.

(b)  Profit Planning:  Cost-Volume-Profit Analysis - Fixed and variable costs-The contributory margin-Break-even analysis-Applications of Cost-Volume-Profit analysis- Variability of fixed costs-Changes in variable costs-Changes in Product-Mix-Increase/reduction in sales volume-Pricing Policies-Analysis for planning and control –Assumption s and limitations.

(c)  Incremental Analysis: Tactical Decisions: Marginal cost-Differential cost –Relevant Cost-Incremental cost Incremental analysis-Opportunity cost-Past and sunk costs-Product analysis and special decisions Changes in sales mix-Adding an new product-Dropping a product-Pricing decisions-Economies of Scale-Operating above capacity-Make or buy decisions-Temporary Plant shutdown-Plant abandonment.

(d)  Budgetary Control – Operations:  Budgetary organization - Budgetary installation-Budgets and standard costs-The Budget as part of the overall business plan-Sales budget-Sales forecast-Production budget-Materials budget-Direct labour budget-Manufacturing overheard budget-Inventory budget-Cost of goods sold budget-Selling & Administrative expenses  budget-Master budget-Fixed and flexible budgets-Development of flexible budget-Cost behavior studies-Preparation of flexible budget-Fixed and variable costs.  Materials & labour - Departmental flexible budgets-Primary allocation of costs-Departmental overhead recovery rtes-Control of costs of service departments.  Aero-base Budgeting.

(e)  Cost Control Through Variance analysis: Variance analysis-Analysis for cost control-Volume variance-Limitations of flexible budgets-standard cost systems-Setting standards-Material Price & quantity variance-Labour rate standards-Labour time or efficiency standards-Labour rate & Efficiency variances-Overhead standards-Normal capacity and standard product cost-Variance analysis of overheads-Volume variance and responsibility.

(f)   Performance Reporting: Type of Reports-Reporting Periods-Level of Reporting-Reporting to top management-Reports of shops floor supervisors and production managers-Principle of exception-Reports in physical units-Limitations of performance reporting and cost controllability.

(g)  Management Control System: Strategic planning and operational control-Responsibility accounting Decentralized divisional control-Transfer prices-Residual income and ROI as tools of control-Centralised control and budgetary systems-Evaluation of performance-Performance Budgeting-Control of enterprises in centrally planned economics.

(h)  Decision Models: Analysis of probability and uncertainty-Element of operations research in decision making-Linear Programming and simulation-Monte-Carlo technique-Cost o optimization in inventories-Production schedules and marketing plans-Computers and decision making.

 

Paper 2 - Financial Management

(a)  Forecasting & Planning: Cash forecasts - Projected profit and loss account and balance sheet-Fund flow forecasts.

(b)  Analysis and Interpretation of Published Statements: Inter-firms/intra-firm comparisons through ratio analysis-Fund flow analysis-Trend analysis-EPS-Capital gearing-Trading on equity-over-trading-over and under-capitalization and their impact on share market prices. Analysis of financial health-Financial sickness; its symptoms and prediction.

(c)  Capital Structuring and Raising Long Term Funds: Issue and timing of Equity share capital, Preference share Capital and Debentures-Adjustments of rights between new shareholders and old shareholders-Issue of bonus shares and issue of share at premium-Underwriting arrangements and managing new issues-listing of share on the stock exchanges-Issue of right shares-Raising long-term loans-Requirements of financial institutions-Impact of financial institutions on financial policy of undertakings-Conversation of loans into equity.

(d)  Working Capital: The concept of working capital-Estimating and analyzing working capital requirements-Sources for financing short term requirements-Internal financing vs. external financing-Credit Policies & collection systems-Inventory control-Cash management.

(e)  Capital Budget: Long range planning-Risk and Uncertainty –Impact of taxation-Capital expenditure budgeting procedure-Preparation of capital expenditure budgets-Departmental allocations-Machinery for appraisal of request-reporting on spending and progress-Process of capital expenditure control-Periodical statements for control PERT & CPM.

(f)   Appraisal of Capital Expenditure Proposals: The criterion of profitability in evaluating capital expenditure proposals-Reducing a proposal to quantitative form-Evaluating the proposal-Return on capital-Time adjusted methods-Discounted Cash flow-Internal rate of return-Excess present Value analysis-Pay-back method.  Social Cost - benefit analysis.

(g)  Internal Financing: Dividend policy-plough back of earnings-Tax and depreciation considerations-Management of reserve-Inflation accounting and its impact.

(h)  Investment Management: Determining investment portfolio-Risk-return relationship-Timing of purchases-Analysis of movements of share market prices-Dow Jones Theory-Formula Plans-Sensitivity of market prices to EPS-Selection of securities.

Group-II

Paper 3- Economic Environment and General Management

Objectives and Scope

A business undertaking necessarily functions within the overall socioeconomic environment of the country.

A management accountant must therefore be able to perceive and identify important trends in the economic environment so as to be able to judge its impact on the business undertakings.  This paper attempts to develop an awareness to such trends.

The emphasis is not so much on the bookish knowledge as on the capacity of the candidate to understand the implications of given business situations, analyse the problems involved from an overall view and present alternatives.  In view of this, the question paper shall have short case problems as well as theory type questions.

(a)  Impact of economic environment and government policies and regulations on management policies with special reference to planned industrial growth, Objectives, targets and achievements

(b)  Economic policy of the government regarding industrial development   Licencing and the working of the industrial Development and Regulation Act.

(c)  Location of Industries, Strategy for diversification of industries.

(d) Industrial relations, role of trade unions, wage boards, labour disputes, joint    Councils, labour participation in management

(e)  Price controls, impact on industrial growth, role of tariff commission

(f)   Impact of MRTP Act on industrial development

(g)  Export promotion policy of foreign trade

(h)  Impact of company legislation on business, regulation of foreign business enterprises.

(i)    Monetary policy, union budget, capital market conditions, taxation and fiscal policies.

(j)    Role of public sector enterprises, trend in management of public sector enterprises.

(k)  Inflation and its Impact on business.

Paper 4- System Management

Objective and Scope

The management accountant is very closely associated with Systems Analysis and Data Processing.  The main objective of this paper is to equip the candidates with the necessary skills in this area.

(a)  Systems: Definition - Types and characteristics-Systems Approach, Benefits and Limitations-Total systems, Synthesis of subsystems and Interface-System development and Implementation.

(b)  MIS: Structure, physical, functional, three tier planning and control, synthesise-structure-Organisation and Management relevant to Information Systems-Information Systems support for forecasting/planning/control and decision making-Development of accounting and operating systems.

(c)  Information System for Functional Areas: Information system for Operations and Production Management—Information System for Project Management-Financial Information systems-Purchasing Information System-Personnel Information System-Marketing Information Systems.

(d)  Data Processing: Computer, Hardware and Software-Data Base Concepts and Management Systems-Batch Processing-On line and Real-time Systems-Applications in various functional areas, viz., sales, production etc.  Micro processing and mini computers.

(e)  System Analysis: - Theory of Systems Analysis-Gross Systems Design and feasibility studies-System plans-Systems Analysis and Design; Techniques and Tools-Design of forms Documentation and Guidelines for a sound systems design - Systems Manual - System Implementation and Periodic Evaluation-Standardized Systems Analysis.

(f)   Work Study: Techniques of work study and measurement - Organization and methods study.

CORPORATE MANAGEMENT COURSE

Papers and Syllabus

A candidate for the Corporate management examination held on or after 31st October, 1985 shall be examined in the subject comprised in the following two groups.

Group I:         Paper 1 - Organisational Behaviour and planning

                     Paper 2 - Management Control and management Audit

Group II:       Paper 3 - Production and Productivity Management

                     Paper 4 - Marketing management

 Group  - I

 Paper 1 – Organisational Behaviour & Planning

 Objectives and Scope: An objective of this paper is to provide the candidate an insight into certain concept of behavioral- sciences which are crucial t the various processes of management.  Another objective is to make the candidates aware of the nuances of the corporate planning process.

(a)  Human Factor in Management : Importance - The basic concepts of human behavior in work situations-Motivation, Morale and Productivity-Behavior of individuals and groups-Formal and Informal groups.  Anatomy of (leadership-) – Styles of leadership and their impact on employee morale and productivity-Participative management-management of changes-Group dynamics

(b)  Organisational Analysis: Organisation Process  - Activity analysis-Authority Structure-Span of supervision.

(c)  Management of Labour Relations in India: Unions & collective bargaining- Consultative Management – Employee participation in Management

(d)  Process of Planning: Corporate planning-evaluation of alternatives-Feed back-Setting objectives - Characteristics of meaningful objectives-The importance of growth-Selecting the growth target-Strengths and Weaknesses of companies in relation to planning - Strategic environmental appraisal-Gathering and Synthesizing information-Methods of forecasting-Measuring the dispersions of forecasting errors-Development of planning perspective-Long range and short range planning-Diversification strategy-Synergy-Developing long range plan-Programme budgeting-Research budgeting-Period budgeting - Management by Objectives.

(e)  Work-study: Work Measurement - Organisation and methods Study.

(f)   The Planning Environment: The socio-economic factors influencing managerial planning.

(g)  Problem areas involving perspective planning:

  1. promotion of new business: Flotation of a subsidiary company, floating a new venture under foreign collaboration.
  2. Location: Analysis of problems involving location of production units, marketing, service/distribution units, procurement centers, maintenance centers etc.
  3. Expansion through diversification: Vertical and horizontal expansion-expansion and decentralizations-Expansion through collaboration-Expansion and Management succession-Expansion through merger and amalgamation- Legal provisions governing amalgamation- Expansion and public policy.
  4. Stagnation and obsolescence: Problems of marketing myopia-problems of managerial obsolescence, product/technology/usage obsolescence-problems of financial myopia.
  5. Consolidation: Streamlining of operation of product line, control and information system.
  6. Rehabilitation Averting imminent failure-Rehabilitation through merger-Rehabilitating a company that has failed  Rehabilitation through governmental intervention.
  7. Special problems of management planning in public sector enterprises.

 Paper 2 – Management Control and Management Audit

 Objectives and Scope:

With the growth in size and complexities, the process of control and performance evaluation had acquired a special significance in the management of the large business undertaking of the day.  This paper seeks to highlight the techniques of management control and management audit.

 Section A – Management Control

(a)  Concept of Control: Control process-Strategic planning and operational controls-Problems of measurement-Feed – back and oscillation-Cost of Control.

(b)  Responsibility accounting: Responsibility center-cost center, profit center, investment center.

(c)  ROI system of divisional control: Transfer pricing-Residential income.

(d)  Budgetary Control System

(e)  Standard Costing as a tool of control

(f)   Management by objectives

(g)  Behavioral problems in the control process

(h)  Internal Control-Formulation of internal control scheme

(i)    Problems of communication and control in public sector units in India

(j)   Co-ordination and Internal control-Financial Cost Control-Budgeting, Accounting and audit - Delegation and accountability - Authority and responsibility - Measurement of results - Ministerial and Parliamentary Control.

 Section B-Management Audit

(a)  Concept of management audit-Its need and scope-Importance-Operations audit.

(b)  Organizing management audit function-Need for inter-disciplinary approach.

(c)  Management audit questionnaires-other techniques of management audit..

(d)  Review of various processes of management-Appraisal of objectives, planning, organisation, control and systems procedures.

(e) Review of functional areas-Purchase management-Inventory management-Production management-Sales management-Personnel management-Accounting and Finance.

(f)   Management audit reports.

Group II

Paper 3-Production and Productivity Management

Objectives and Scope:

The main objective of this paper is to make the candidates familiar with the basic production processes and to make them appreciate the dimensions of production function as an integral part of the total Corporate Management process.  Since this is only an appreciation course, the candidates should not be tested in the procedural or technical details.

(a)  Production process and organisation for production-Production operations

(b)   Materials procurement and control

(c)   Product mix, Quality control, Material handling, Layout, Scheduling, Assembling etc.

(d)  Application of Operations Research Techniques like Linear programming,

      PERT, Queuing Theory, Simulation - Technological obsolescence.

(e)  Productivity techniques;

(f)   Input output analysis - Measurement of labour and capital productivity

(g)   Cost benefit analysis - Learning curves

(h)  Value analysis, Method analysis, motion study techniques work measurement techniques.

Paper 4-Marketing Management

(a)  Scope: To make the candidates familiar with the basic marketing processes and to make them appreciate the dimensions of marketing decisions and how marketing forms an integral part of the total corporate management process.  Marketing decisions rather than procedural details of selling and distribution should be emphasized.

(b)  The marketing process in terms of product, customers, channels, prices; promotion, and distribution-marketing mix.

(c)  Marketing Decisions:

(i)      relating to product, Product line policy, product development, product quality, brand product obsolescence

(ii)     relating to pricing: Different strategies of pricing in the context of the Indian environment

(iii)     relating to distribution channels, General vs. Exclusive distribution, national vs. regional distributions, direct selling vs. Intermediates

(iv)    relating to customer developments, Institutional, rural, industrial etc.-Customer stratification

(v)    relating to logistics of distribution

(vi)   relating to strategy of promotion.

(d)   Marketing Audit - Developing Marketing objectives and relating them to over all objectives of the company

(e)   The marketing objectives of public sector enterprises; Considerations involving pricing differential and discrimination. Production development in public              sector units.

(f)   Special consideration governing distribution: System of controls and quotas-Channels of distribution; Co-operative sector, Government Agencies-Public Sector and export marketing-considerations governing marketing consumer product.

(g)  Advertising and Public Sector products and services.  Marketing function vis-à-vis production function in public sector - the cost benefits analysis of marketing function in public sector. Evaluation of ‘Corporate Image’ of public sector products and services.