STUDY MATERIAL
MODULE 1
PAPER 2
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$ %& ' '& '
, © THE INSTITUTE OF COMPANY SECRETARIES OF INDIA
TIMING OF HEADQUARTERS
Monday to Friday
Office Timings – 9.00 A.M. to 5.00 P.M.
Public Dealing Timings
Without financial transactions – 9.30 A.M. to 5.00 P.M.
With financial transactions – 9.30 A.M. to 4.00 P.M.
Phones
4150444,45341000
Fax
011-24626727
Website
www.icsi.edu
E-mail
Laser Typesetting by Delhi Computer Services, Dwarka, New Delhi, and
Printed at M.P.Printers/February, 2013/10,000
, EXECUTIVE PROGRAMME
COST AND MANAGEMENT ACCOUNTING
Finance and accounting have assumed much importance in today’s competitive world of business
wherein corporate organisations have to show the true and fair view of their financial position. Thus,
the application of accounting in the business sector has become an indispensable factor. Company
Secretary has to provide the complete and accurate information about the financial operations of the
company to management for decision making. This emphasises that the books of account are to be
maintained accurately, up-to-date and as per the norms.
The subject ‘Cost and Management Accounting’ is very important and useful for optimum
utilisation of existing resources. These are branches of accounting and had been developed due to
limitations of financial accounting. It is an indispensable discipline for corporate management, as the
information collected and presented to management based on cost and management accounting
techniques helps management to solve not only specific problems but also guides them in decision
making. Keeping in view the importance of this subject, various topics on Cost and Management
Accounting have been prescribed in the syllabus of CS Executive Programme with the objective of
acquainting the students with the basic concepts used in cost accounting and management
accounting having a bearing on managerial decision-making.
The entire paper has been discussed in twelve study lessons. In starting four study lessons we
have discussed about the basic of cost accounting, material, labour and overheads costing. Further
we have highlighted the concept of activity based costing, cost records, different costing systems.
Thereafter study focuses on the marginal costing, standard costing, budgeting & its applications for
decision making in business. At last we have discussed about cost accounting records, cost audit and
analysis & interpretation of financial statements.
In this study every efforts has been made to give a comprehensive coverage of all the topics
relevant to the subject. In all study lessons the requisite theoretical framework for understanding the
practical problems in the subject has been explained and wherever necessary practical illustrations
have been given to facilitate better understanding. At the end of each study lesson a brief about the
lesson have been given under the caption ‘Lesson Round Up’ as well a good blend of theoretical and
practical questions have been given under the caption ‘Self Test Questions’ for the practice of
students to test their knowledge. In fact, this being a practical paper, students need to have good
theoretical knowledge and practice to attain the requisite proficiency and confidence.
This study material has been published to aid the students in preparing for the Cost and
Management Accounting paper of the CS Executive Programme. It is part of the education kit and
takes the students step by step through each phase of preparation stressing key concepts, pointers
and procedures. Company Secretaryship being a professional course, the examination standards are
set very high, with emphasis on knowledge of concepts, applications, procedures and case laws, for
which sole reliance on the contents of this study material may not be enough.
Therefore, in order to supplement the information/contents given in the study material, students
are advised to refer to the Suggested Readings mentioned in the study material, Student Company
Secretary, Business Dailies and Journals.
In the event of any doubt, students may write to the Directorate of Academics and Professional
Development in the Institute for clarification at .
Although due care has been taken in publishing this study material yet the possibility of errors,
omissions and/or discrepancies cannot be ruled out. This publication is released with an
understanding that the Institute shall not be responsible for any errors, omissions and/or discrepancies
or any action taken in that behalf.
Should there be any discrepancy, error or omission noted in the study material, the Institute shall be
obliged if the same are brought to its notice for issue of corrigendum in the ‘Student Company Secretary’.
, (iv)
EXECUTIVE PROGRAMME
SYLLABUS
FOR
MODULE 1 - PAPER 2: COST AND MANAGEMENT ACCOUNTING (100 Marks)
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.
Detail 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 Accounting 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
• 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
MODULE 1
PAPER 2
! " "# #
$ %& ' '& '
, © THE INSTITUTE OF COMPANY SECRETARIES OF INDIA
TIMING OF HEADQUARTERS
Monday to Friday
Office Timings – 9.00 A.M. to 5.00 P.M.
Public Dealing Timings
Without financial transactions – 9.30 A.M. to 5.00 P.M.
With financial transactions – 9.30 A.M. to 4.00 P.M.
Phones
4150444,45341000
Fax
011-24626727
Website
www.icsi.edu
Laser Typesetting by Delhi Computer Services, Dwarka, New Delhi, and
Printed at M.P.Printers/February, 2013/10,000
, EXECUTIVE PROGRAMME
COST AND MANAGEMENT ACCOUNTING
Finance and accounting have assumed much importance in today’s competitive world of business
wherein corporate organisations have to show the true and fair view of their financial position. Thus,
the application of accounting in the business sector has become an indispensable factor. Company
Secretary has to provide the complete and accurate information about the financial operations of the
company to management for decision making. This emphasises that the books of account are to be
maintained accurately, up-to-date and as per the norms.
The subject ‘Cost and Management Accounting’ is very important and useful for optimum
utilisation of existing resources. These are branches of accounting and had been developed due to
limitations of financial accounting. It is an indispensable discipline for corporate management, as the
information collected and presented to management based on cost and management accounting
techniques helps management to solve not only specific problems but also guides them in decision
making. Keeping in view the importance of this subject, various topics on Cost and Management
Accounting have been prescribed in the syllabus of CS Executive Programme with the objective of
acquainting the students with the basic concepts used in cost accounting and management
accounting having a bearing on managerial decision-making.
The entire paper has been discussed in twelve study lessons. In starting four study lessons we
have discussed about the basic of cost accounting, material, labour and overheads costing. Further
we have highlighted the concept of activity based costing, cost records, different costing systems.
Thereafter study focuses on the marginal costing, standard costing, budgeting & its applications for
decision making in business. At last we have discussed about cost accounting records, cost audit and
analysis & interpretation of financial statements.
In this study every efforts has been made to give a comprehensive coverage of all the topics
relevant to the subject. In all study lessons the requisite theoretical framework for understanding the
practical problems in the subject has been explained and wherever necessary practical illustrations
have been given to facilitate better understanding. At the end of each study lesson a brief about the
lesson have been given under the caption ‘Lesson Round Up’ as well a good blend of theoretical and
practical questions have been given under the caption ‘Self Test Questions’ for the practice of
students to test their knowledge. In fact, this being a practical paper, students need to have good
theoretical knowledge and practice to attain the requisite proficiency and confidence.
This study material has been published to aid the students in preparing for the Cost and
Management Accounting paper of the CS Executive Programme. It is part of the education kit and
takes the students step by step through each phase of preparation stressing key concepts, pointers
and procedures. Company Secretaryship being a professional course, the examination standards are
set very high, with emphasis on knowledge of concepts, applications, procedures and case laws, for
which sole reliance on the contents of this study material may not be enough.
Therefore, in order to supplement the information/contents given in the study material, students
are advised to refer to the Suggested Readings mentioned in the study material, Student Company
Secretary, Business Dailies and Journals.
In the event of any doubt, students may write to the Directorate of Academics and Professional
Development in the Institute for clarification at .
Although due care has been taken in publishing this study material yet the possibility of errors,
omissions and/or discrepancies cannot be ruled out. This publication is released with an
understanding that the Institute shall not be responsible for any errors, omissions and/or discrepancies
or any action taken in that behalf.
Should there be any discrepancy, error or omission noted in the study material, the Institute shall be
obliged if the same are brought to its notice for issue of corrigendum in the ‘Student Company Secretary’.
, (iv)
EXECUTIVE PROGRAMME
SYLLABUS
FOR
MODULE 1 - PAPER 2: COST AND MANAGEMENT ACCOUNTING (100 Marks)
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.
Detail 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 Accounting 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
• 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
