Company Accounts, Cost and Management Accounting - ICSI

883 Pages·2012·5.43 MB·English

EXECUTIVE PROGRAMME
STUDY MATERIAL
COMPANY
ACCOUNTS, COST
AND MANAGEMENT
ACCOUNTING

MODULE I - PAPER 2

ICSI House, 22, Institutional Area, Lodi Road, New Delhi 110 003
tel [phone] fax [phone]
email [email protected] website www.icsi.edu
© THE INSTITUTE OF COMPANY SECRETARIES OF INDIA

TIMING OF HEADQUARTERS

Monday to Friday

Office timings 9.00 A.M. to 5.30 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:
41504444, 45341000

Grams:
COMPSEC

Fax:
011-24626727

Website:
www.icsi.edu

E-mail:
[email protected]

Laser Typesetting by Delhi Computer Services, Dwarka, New Delhi, and
Printed at M.P. Printers, NOIDA/
EXECUTIVE PROGRAMME
COMPANY ACCOUNTS, 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. Of
course, the company secretary has to provide the complete and accurate
information about the financial operations of the company to his superiors to
take decisions. This emphasises that the books of account are to be
maintained accurately, up-to-date and as per the norms.
Considering the significance of the matter the subject Company Accounts
has been prescribed in our syllabus with the objective to provide conceptual
understanding of the principles involved in the maintenance of company
accounts in accordance with the provisions of company law. While designing
the contents of the syllabus, it has been presumed that the students possess
the knowledge of the basic principles of Accountancy, prescribed for the
Foundation Programme. Besides, the students have requisite knowledge of
legal provisions of the Companies Act, 1956 and the procedures prescribed
there under.
The subject ‘Cost and Management Accounting’ is very important and
useful for optimum utilisation of existing resources. 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 our course 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 sixteen study lessons, divided
into two parts viz. Part-A and Part-B. Part-A deals with Company Accounts
while Part-B deals with Cost and Management Accounting. This study
material has been updated upto June, 2011. The topics on Company
Accounts have been discussed in seven study lessons comprising the
various accounting aspects of joint stock companies. While in Cost and
Management Accounting 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 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
(iv)
paper, students need to have good theoretical knowledge and practice to
attain the requisite proficiency and confidence. 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.
Although 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.
(v)

EXECUTIVE PROGRAMME
SYLLABUS
FOR
PAPER 2: COMPANY ACCOUNTS, COST AND
MANAGEMENT ACCOUNTING
Level of knowledge: Working knowledge.
Objectives:
(i) To provide working knowledge of accounting principles and procedures for
companies in accordance with the statutory requirements.
(ii) To acquaint the students with cost and management accounting techniques
and practices.
Detailed contents:
PART A: COMPANY ACCOUNTS (50 MARKS)
1. Accounting standards - relevance and significance; national and international
accounting standards.
2. Accounting for share capital transactions - issue of shares at par, at premium
and at discount; forfeiture and re-issue of shares; buy-back of shares;
redemption of preference shares; rights issue.
3. Issue of debentures - accounting treatment and procedures; redemption of
debentures; conversion of debentures into shares.
4. Underwriting of issues; acquisition of business; profits prior to incorporation;
treatment of preliminary expenses.
5. Preparation and presentation of final accounts of joint stock companies as
per company law requirements; bonus shares.
6. Holding and subsidiary companies - accounting treatment and disclosures;
consolidation of accounts.
7. Valuation of shares and intangible assets.
PART B: COST AND MANAGEMENT ACCOUNTING (50 MARKS)
8. Cost accounting – objectives of costing system; cost concepts and cost
classification; management accounting – nature and scope; role of
management accountant, tools and techniques of management accounting;
distinction between financial accounting, cost accounting and management
accounting.
9. Elements of cost:
(i) Material cost – purchase procedures, store keeping and inventory control,
fixing of minimum, maximum and re-order levels, ABC analysis, pricing of
receipts and issue of material and accounting thereof; accounting and
(vi)
control of wastage, spoilage and defectives.
(ii) Labour cost – classification of labour costs, payroll procedures, monetary
and non-monetary incentive schemes; labour turnover and remedial
measures; treatment of idle time and overtime.
(iii) Direct expenses – nature, collection and classification of direct expenses
and its treatment.
(iv) Overheads – nature, classification, collection, allocation, apportionment,
absorption and control of overheads.
10. Methods of costing - unit costing, contract costing.
11. Budgetary control – preparation of various types of budgets, advantages and
limitations; budgetary control reports to management.
12. Marginal costing - application of marginal costing; cost-volume-profit
relationship; break-even analysis, preparation of break-even charts; profit –
volume graph; practical application of profit volume ratio.
13. Analysis and interpretation of financial statements - nature, objectives; latest
trends in presenting financial data; importance and limitations; accounting
ratios - classification, advantages and limitations.
14. Cash flow statements – classification of cash flows, preparation and
usefulness.
(vii)

LIST OF RECOMMENDED BOOKS

COMPANY ACCOUNTS,
COST AND MANAGEMENT ACCOUNTING
Readings:

1. M.C. Shukla, T.S. : Advanced Accounts Vol. II; S. Chand &
Grewal & S.C. Gupta Company Ltd., 7361, Ram Nagar,
New Delhi-110 055.
R.L. Gupta & M.
2. : Company Accounts; Sultan Chand & Sons,
Radhaswamy
23, Daryaganj, New Delhi-110 002.
3. S.P. Jain & K.L. Narang : Advanced Accountancy-Vol.II; Kalyani
Publishers, 23, Daryaganj, New Delhi - 110 002.
4. S.N. Maheshwari & : Advance Accounting Vol. II; Vikas Publishing
S.K. Maheshwari House (Pvt.) Ltd., A-22, Sector 4, Noida – 201
301.
5. Ashok Sehgal & Deepak : Advanced Accounting Vol. 2; Taxmann’s,
Sehgal 59/32, New Rohtak Road, New Delhi-110 005.
6. J.R. Monga : Fundamentals of Corporate Accounting; Mayoor
Paperbacks, A-95, Sector 5, Noida-201 301.
7. S.P. Jain & K.L. Narang : Cost and Management Accounting; Kalyani
Publishers, 23, Daryaganj, New Delhi-110 002.
8. M.N. Arora : Cost and Management Accounting (Theory and
Problems); Himalaya Publishing House,
Ramdoot, Dr. Bhalerao Marg, Kelewadi,
Girgaon, Mumbai – 400 004.
9. R.S.N. Pillai & Bhagvathi : Management Accounting; S. Chand & Co. Ltd.,
7361, Ram Nagar, Qutab Road,
New Delhi-110 055.
10. V.K. Saxena & C.D. : Cost Accounting; Sultan Chand & Sons, 23,
Vashist Daryaganj,
New Delhi -110 002.
11. M.N. Arora : A Text Book of Cost and Management
Accounting; Vikas Publishing House (P) Ltd.,
A-22, Sector 4, Noida – 201 301.
12. S.N. Maheshwari : Cost and Management Accounting; Sultan
Chand & Sons, 23, Daryaganj,
New Delhi -110 002.
13. S N Maheswari & S N : Cost Accounting -Theory and Problems; Shree
Mittal Mahavir Book Depot; 2603, Nai Sarak,
(viii)
Delhi 110 006
14. I.M. Pandey : Management Accounting; Vikas Publishing
House (P) Ltd., A-22, Sector 4, Noida – 201 301
15. C.T. Horngren : Cost and Management Accounting - A
Managerial Emphasis; Pearson Education Asia,
482, F.I.E. Patparganj, Delhi-110 092.
References:
1. Guide To Indian : T.P. Ghosh, CA. Srinivasan Anand G. Taxmann
Accounting Standards Publication (P) Ltd., 59/32, New Rohtak Road,
Converged with IFRSs New Delhi – 110 005.
2. A practical Guide to : Dr. Sanjeev Singhal, Taxmann Publication (P)
international Financial Ltd., 59/32, New Rohtak Road, New Delhi – 110
Reporting Standards 005.
(IFRSs)
3. Dolphy D’Souza : Indian Accounting Standards & GAAPP; Snow
White Publications Pvt. Ltd., Her Mahal, 532,
Kalbadevi Road, Mumbai – 400 002.
4. Compendium of : The Institute of Chartered Accountants of India,
Accounting Standards New Delhi .
5. S.P. Iyengar : Cost and Management Accounting; Sultan
Chand & Sons, 23, Daryaganj,
New Delhi – 110 002.
6. Ravi M. Kishore : Advanced Management Accounting; Taxmann
Publication (P) Ltd., 59/32, New Rohtak Road,
New Delhi – 110 005.
7. M.Y. Khan & P.K. Jain : Theory and Problems of Management and Cost
Accounting; McGraw-Hill Education (India) Ltd.
B-4, Sector 63, Gautam Budh Nagar,
Noida – 201 301.
8. Drury Colin : Management and Cost Accounting;
International Thomson Business Press, London.
9. Dominiak & Louderback : Managerial Accounting; South Western College,
Publishing Company, Ohio, USA.
(ix)

C O N T E N T S

Study Contents

PART A
COMPANY ACCOUNTS
I. Accounting Standards
II. Accounting for Share Capital
III. Issue and Redemption of Debentures
IV. Underwriting of Issues and Acquisition of Business
V. Final Accounts of Joint Stock Companies
VI. Consolidation of Accounts
VII. Valuation of Shares and Intangible Assets

PART B
COST AND MANAGEMENT ACCOUNTING
VIII. Introduction to Cost and Management Accounting
IX. Material Cost
X. Labour Cost
XI. Direct Expenses and Overheads
XII. Methods of Costing
XIII. Budgetary Control
XIV. Marginal Costing
XV. Analysis and Interpretation of Financial Statements
XVI. Cash Flow Statement
TEST PAPERS
(x)