AD32: Fundamentals of Management Accounting

AD32: Fundamentals of Management Accounting is an Intermediate Level paper in the KASNEB Accounting Technician Diploma (ATD) qualification. It equips learners with the fundamental knowledge and practical skills required to collect, classify, analyze, and interpret cost and management accounting information for planning, decision-making, and control. The course focuses on cost determination, budgeting, performance evaluation, and the application of management accounting techniques to improve organizational efficiency and profitability.

Key Topics Covered

• Nature and purpose of cost and management accounting
• The nature of cost accounting and costing terms
• The role of cost accounting in management
• The purposes of cost accounting information
• Scope of cost accounting
• Meaning of management accounting, scope, limitations, applications
• Relationship between cost, financial and management accounting
• Selection of an ideal cost accounting system
• Cost classification
• Definition and purpose of cost classification
• Methods of cost classification: By nature/elements of manufacturing costs; Functional classification; Behavioral classification; Controllability; Time; Financial accounting; Identification with inventory
• Cost estimation
• Meaning of cost estimation
• Methods of estimating cost; non-mathematical methods like engineering method, accounts analysis method and high-low method; mathematical methods like scatter graph method, OLS regression method
• Cost accumulation
• Accounting for materials and inventory; material cost records, purchasing procedures, receipt and issues of material, methods of valuing material issues, stock control procedures
• Accounting for labour: methods of labour remuneration, labour control procedures, maintenance of labour records
• Accounting for overheads: types of overheads, manufacturing, distribution and administration, departmental cost allocation and apportionment, overheads analysis, overhead absorption rates, over or under absorption
• Accounting for materials and inventory; material cost records, purchasing procedures, receipt and issues of material, methods of valuing material issues, stock control procedures
• Accounting for labour: methods of labour remuneration, labour control procedures, maintenance of labour records
• Accounting for overheads: types of overheads, manufacturing, distribution and administration, departmental cost allocation and apportionment, overheads analysis, overhead absorption rates, over or under absorption
• Cost bookkeeping
• The flow of costs in a business enterprise
• Cost bookkeeping- interlocking and integrated ledger systems
• Costing methods
• Job order costing
• Batch costing
• Process costing (excluding work in progress, joint and by-products)
• Service costing
• Unit costing
• Marginal and absorption costing
• Distinction between marginal and absorption costing, valuation of products under marginal and absorption costing
• Preparation of marginal and absorption statements; cost of production and profit determination
• Reconciliation of marginal profits and absorption profits, application of marginal costing: break-even analysis and charts (single product), simplified decision problems; accept or reject, special order, dropping a product, make or buy and choice of a product where a limiting factor exists
• Budgeting and budgetary control
• Nature and purposes of budgets
• Preparation of budgets; master budgets, functional (department budgets, cash budgets), proforma financial reports (income statements and balance sheets)
• Purpose of budgetary control; Operation of a budgetary control system, organisation and coordination of the budgeting function
• Emerging issues and trends