CPA Intermediate Level
Management Accounting cheat sheet
Every chapter's key points, formulas and definitions on one page, for the last week before the exam. Each heading links to the chapter that explains it.
The context of management accounting
- Cost accounting ascertains, records, classifies and analyses the costs of products, services, activities and departments; management accounting uses that cost information, with other financial and non-financial data, to help managers plan, control and decide.
- A decision is a choice among alternatives whose consequences lie in the future, so the management accountant identifies the relevant costs and revenues, the future cash flows that differ between the alternatives, and leaves out historical and sunk ones.
- Management accounting serves internal users, has no legal requirement or prescribed format, looks to the future and uses non-monetary as well as monetary data; financial accounting serves outsiders under IFRS and the Companies Act, 2015.
- The management accountant holds a staff position: they frame and quantify, the line manager decides and is accountable, and under the Accountants Act, 2008 and ICPAK's code of ethics they report what the figures show.
- Its limits are real: it depends on the underlying records, rests on estimates and judgement, costs money to run, changes behaviour and captures only what can be measured.
Key terms
- Dependence on financial records
- Management accounting reworks the data that financial and cost accounting record; if those records are late, incomplete or wrong, so is the analysis.
- Estimates and assumptions
- Budgets, standards, cost behaviour and relevant costs rest on forecasts and judgements about the future; the precision of a report can disguise the uncertainty of its inputs.
- Subjectivity of classification
- Whether a cost is fixed or variable, direct or indirect, controllable or not, and how overheads are apportioned, are matters of judgement, and different choices give different product costs and different decisions.
- Cost of the system
- Detailed costing, budgeting and variance reporting need staff, software and management time; for a small business the cost can exceed the benefit, and the system must be proportionate.
- Behavioural effects
- Budgets and standards that are imposed, unrealistic or used to blame produce padding, gaming and resistance rather than control; the numbers change behaviour, not always for the better.
- Quantifiable factors only
- The analysis captures what can be measured in shillings or units; quality, morale, customer goodwill, reputation and strategic position are the 'overriding considerations' the later chapters keep flagging and the report can only note.
- A tool, not a decision
- Management accounting informs judgement; it does not replace it, and a manager who follows the numbers without understanding them will be misled by the first assumption that fails.
The rest of the sheet covers
- Costing terms and concepts
- Cost estimation
- Cost accumulation
- Activity-based costing
- Product costing methods
- Marginal and absorption costing
- Cost-volume-profit analysis
- Budgetary control
- Standard costing and variance analysis
- Worked examples
- Exam technique and revision
- Glossary