Costing and Financial Management is a combination of 2 subjects cost accounting and Financial Management, each of 50 marks.
Costing subject is a study of manufacturing and service industry in a very deep way. This subject helps to value various things used in industry. Cost control and cost reduction have always been important aim along with managerial decision making. It’s a very practical subject and little theoretical concepts are also asked in the exams.
Financial Management is the management of funds which is the most important aspect of an enterprise. This subject helps in decision making from working capital to capital budgeting.
The management of the finance of a business is the most important objective. This is for creation of wealth for the business, generate cash and provide an adequate return on investment bearing in mind the risks that the business is taking and the resources invested. The key elements are:-
- Financial planning
- Financial Control
- Financial decisions.
These aspects are very crucial things which students learn here. This subject is based on realizations and interpretations, which can be relished on proper understanding of logics & concepts.
(One paper – three hours – 100 marks)
Part I: Cost Accounting (50 marks)
- Introduction to Cost Accounting
- Objectives and scope of cost accounting.
- Cost centres and cost units.
- Cost classification for stock valuation, profit measurement, decision making and control.
- Coding systems.
- Elements of cost.
- Cost behaviour pattern, separating the components of semi-variable costs.
- Installation of a costing system.
- Relationship of cost accounting, financial accounting, management accounting and financial management.
- Cost Ascertainment
- Material Cost
- Procurement procedures.
- Inventory control.
- Inventory accounting.
- Employee Cost
- Attendance and payroll procedures, overview of statutory requirements, overtime, idle time and incentives.
- Labour turnover.
- Utilisation of labour, direct and indirect labour, charging of labour cost, identifying labour hours with work orders or batches or capital jobs.
- Efficiency rating procedures.
- Remuneration systems and incentive schemes.
- Direct Expenses
- Material Cost
- Cost Book-keeping Cost ledgers – non-integrated accounts, integrated accounts, reconciliation of cost and financial accounts.
- Costing Systems
- Job Costing : Job cost cards and databases, collecting direct costs of each job, attributing overhead costs to jobs,applications of job costing.
- Batch Costing.
- Contract Costing.
- Process Costing.
- Operating Costing System.
- Introduction to Marginal Costing
Marginal costing compared with absorption costing, contribution, breakeven analysis and profit volume graph.
- Introduction to Standard Costing
Various types of standards, setting of standards, basic concepts of material and labour standards and variance analysis.
- Budgets and Budgetary Control
The budget manual, preparation and monitoring procedures, budget variances, flexible budget, preparation of functional budget for operating and non-operating functions, cash budget, master budget, principal budget factors.
Part II: Financial Management (50 marks)
- Scope and Objectives of Financial Management
- Meaning, importance and objectives.
- Conflicts in profit versus value maximisation principle.
- Role of Chief Financial Officer.
- Time Value of Money
Compounding and discounting techniques – concepts of annuity and perpetuity.
- Financial Analysis and Planning
- Ratio analysis for performance evaluation and financial health.
- Application of ratio analysis in decision making.
- Analysis of cash flow statement.
- Financing Decisions
- Cost of Capital – weighted average cost of capital and marginal cost of capital.
- Capital Structure decisions – capital structure patterns, designing optimum capital structure, constraints, various capital structure theories.
- Business risk and financial risk – operating and financial leverage, trading on equity.
- Types of Financing
- Different sources of finance.
- Project financing – intermediate and long term financing.
- Negotiating term loans with banks and financial institutions and appraisal thereof.
- Introduction to lease financing.
- Venture capital finance.
- Investment Decisions
- Purpose, objective, process.
- Understanding different types of projects.
- Techniques of decision making: non-discounted and discounted cash flow approaches – payback period method, accounting rate of return, net present value, internal rate of return, modified internal rate of return, discounted payback period and profitability index.
- Ranking of competing projects, ranking of projects with unequal lives.
- Management of working capital
- Working capital policies.
- Funds flow analysis.
- Inventory management.
- Receivables management.
- Payables management.
- Management of cash and marketable securities.
- Financing of working capital.