MOST IMPORTANT TOPICS OF THE JAIIB AFM STUDY MATERIAL 2023 EXAM
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We are back with our quick and easy revisionary notes on the JAIIB 2023 revised topics which you may not find anywhere else in the market. Our video lecture series is available in the market and has already covered the following topics.
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- Cost, costing, cost accounting, cost accountancy, practice questions
- Cost, elements of cost, direct labor, material and expense, indirect labor, material and expense, and inward carriage
- Types of cost, fixed cost, variable costs, semi-variable cost, controllable costs and uncontrollable cost, opportunity cost, operating cost
- Classification of cost, Functional classification of cost, classification based on time, cost classification for decision making, based on the accounting period, association with the product, costing by the degree of traceability to the product, by changes in activity or volume
- Costing and its types, job costing, contract costing, batch costing, process costing, operating costing, departmental costing, Multiple or composite costing
- Techniques of costing, Historical costing, standard costing, absorption costing, marginal costing, direct costing, uniform costing, activity-based costing
- Cost accounting detailed, Cost accountancy detailed, Importance of cost accounting, the difference between final accounting and cost accounting, the scope of cost accountancy
- Nature and scope of financial management, estimation of financial requirements, deciding capital structure, selecting a source of finance, selecting a pattern of investment, proper cash management, implementing financial controls, Management of earnings/Profits, and the relationship of finance with other business functions.
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Best AFM STUDY MATERIAL IMPORTANT TOPICS
Cost accounting is a narrow term in which only the cost of a product is recorded and classified whereas cost accountancy is a wider range that may include costing, cost accounting, principles, and techniques.
Cost accounting, a subset of management accounting, looks at every expense along the supply chain to calculate the actual cost of producing an item or providing a service. It is completed to generate budgets and analyze profitability. The information produced by this method can be used by managers to determine which services, divisions, or products are more profitable and which ones need to be improved. Cost accounting includes figuring out fixed and variable costs. Fixed costs are outlaid and happen every month regardless of the volume of production. Examples include rent, depreciation, loan interest, and leasing charges. Costs like supply, labor, and maintenance are examples of what are known as variable costs since they change as the volume of production changes. Tell us in the comments how much you like our AFM STUDY MATERIAL 2023.
IMPORTANCE OF COST ACCOUNTING
Whatever may be the type of the business it involves expenditures on labor, materials, and the other items required in manufacturing and disposing of the products. The management has to avoid the possibility of waste at each stage, make sure no machine remains idle, efficient labor gets due incentive, by-products are properly utilized and costs are ascertained. Besides the management, the creditors and employees are also benefitted in numerous ways by instillation of a good cost accounting system.
Cost accounting increases overall productivity and serves as an important tool in bringing prosperity to the nation. So, the following categories can be used to discuss the significance of cost accounting:
Cost accounting provides an invaluable aid to management. It provides detailed costing information to the management to enable them to maintain effective control which helps efficiency in keeping a check on wastage and losses. It facilitates delegates of responsibility for important tasks and the rating of employees.
To conduct all these, management should be capable of using the information properly provided by cost accounts. Various advantages derived by the management from the good system of costing are that Cost accounting helps in periods of trade depressions and trade competition. The organization cannot afford to have losses unchecked.
Management must know the areas where the economy may be sought, waste eliminated and efficiency increased. The organization should know the actual cost of its products before embarking on a scheme of price reduction. An adequate system of costing facilitates this.
Although the law of supply and demand to a great extent determines the price of the article/product. Cost to the producer is a significant factor. The producer can take necessary guidance from his costing records in case it is he/she is in opposition to fixing or changing the price charged.
It has an important role to play in the management to make decisions making process properly informed. It aids in fixing prices and cost reduction as cost needs to be known before fixing the price that can be profitable.
It plays a crucial role in attracting creditors to the business as it enhances business management which makes a business trustworthy for creditors.
It influences the salary, wages, allowances, and bonuses of the employees.
The profitability of a business has a positive impact on the national economy. As the profitability of the businesses grows more likely will it be for GDP to grow.
DIFFERENCE BETWEEN FINANCIAL MANAGEMENT AND FINANCIAL ACCOUNTING
|Basis of difference||Financial Accounting||Management Accounting|
|Nature||It’s historical||It is concerned with data projection for the future.|
|Object||Keep track of different transactions, understand your financial situation, and calculate your profit and loss after the fiscal year.||To give management data for creating policies and programs|
|Subject matter||assessing the company’s overall performance||personally, manages multiple units, departments, and cost centres.|
|Precision||Only exact values that are 100% accurate and precise||Actual numbers are not highlighted.|
|Reporting||Both internal and external||Internal only|
|Description||Only money transactions||Monetary and nonmonetary events, information|
The use of expense and cost accounting theories for improved corporate control while taking into account how to calculate profitability is known as cost accountancy. It also involves presenting the data acquired to support managerial decision-making.
It covers costing and cost accounting principles, strategies, and methodologies. A cost accountant uses it to perform cost control and cost ascertainment.
So now that we’ve established that the price, we must pay to obtain anything is known as the cost, costing is the process of learning how the cost is derived. Cost accounting offers the information needed to obtain the costing. Cost accounting standards and regulations must be followed when conducting costing and cost accounting.
SCOPE OF COST ACCOUNTANCY
Cost ascertainment: It deals with gathering and analyzing expenses, measuring the production of various products at various stages of manufacturing, and connecting production with expenses. Multiple methods of cost, such as Historical or Actual Costs, Estimated Costs, Standard Costs, etc., are a result of the different ways that expenses are collected.
Again, the numerous methods for measuring production have led to several costing techniques, including specific order costing, operation costing, etc. Different costing methodologies, such as the Marginal Cost Technique, Total Cost Technique, Direct Cost Technique, etc., have been developed to connect production with expenses.
Cost accounting: It is a procedure for keeping track of costs that starts with the recording of expenses and finishes with the creation of statistical data. It is a formal framework for determining and regulating the costs of goods and services.
Either the historical or predefined system of costing can be used to determine cost. Either conventional costing or projected costing can be used to predict the cost. It is necessary to reconcile the cost and financial accounts if they are maintained separately to confirm the accuracy of both sets of accounts.
Cost control: Cost control is the direction and management of an undertaking’s running expenses through executive action. It seeks to direct actual performance in the direction of the line of targets; it controls actual performance if it deviates or differs from the targets. This controlling and directing are accomplished by executive action. Standard costing, budgetary management, accurate presentation and reporting of cost data, and cost audit can all be used to keep costs under control.
Cost audits: Cost audits are performed to ensure that cost accounts are accurate and that the cost accounting plan is being followed. Its goal is to check the accuracy of the math in cost accounts and other records as well as the proper application of the laws and principles.
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