Chapter 26: Cost and Management Accountancy

Introduction

Cost and Management Accountancy (CMA), one of the two premiere accountancy professions (the other being Chartered Accountancy) has emerged in an almost new form. Today, CMAs are playing a vital role in developing competitiveness of companies in the domestic and global markets. While financial accounting is aimed at recording the business transactions of a firm, i.e., “accounting for the money”, cost accounting provides a system for effective utilisation of money. Cost accounting is thus concerned with the classification, recording, allocation and analysis of cost data to provide information for product costing, operational control, inventory valuation and decision-making. The provision of comprehensive but relevant cost data is an essential component in successful management. Cost accounting is one of the techniques of management accounting which provides information to management on present and projected costs and on the profitability of individual projects, products, activities of departments as a guide to decision-making and financial planning. In a sense, management accounting could be described as the development and maintenance of a management information system.

The Courses

The education for Cost and management Accounting (CMA) is provided by the Institute of Cost and Works Accountants of India (ICWAI) (12 Suddar Street, Calcutta 700016). Started as the Indian Institute of Cost and Works Accountants in 1944, it was reconstituted as ICWAI under an Act of Parliament, viz., the Cost and Works Accountants Act, 1959, to regulate the profession of Cost Accountants which has several regulatory functions. It is the only statutory professional organisation and licensing body in India specializing in Cost and Management Accounting.

The head office of ICWAI is located in Calcutta with four Regional Councils, one each in Calcutta (Eastern Region), Chennai (South Region), Delhi (Northern Region) and Mumbai (Western Region). Persons desirous of entering the profession have to pass three successive examinations conducted by the Institute: (1) Foundation Examination; (2) Intermediate Examination; and (3) Final Examination. The Board of Studies of the Institute manages the education for CMA. Students who pass all the three examinations are required to acquire practical experience in order to be admitted as Associate Members (AICWA) which is the professional qualification.

Admission to the Foundation Course Examination is open to a students who have completed 17 years of age on the date of application and have passed the 10+2 examination. The Foundation Course has four papers: (1) Business Fundamentals and Economics; (2) management and Organisation; (3) Basic Mathematics and Statistics; and (4) Commercial Law. To pass the examination a candidate needs to obtain, in one sitting, a maximum of 40% of marks in each papers and an aggregate of 50% of the total marks of all papers. Successful completion of the Foundation course entitles students to register themselves for the Intermediate programme and thereafter the Final programme. The Institute had thoroughly revised its syllabuses for these programmes which had been introduced from July 1, 1994 (See the Annexure).

The first step, is to register as students of the Institute. The qualification requirements are: (1) the should be 18 years of age on the date of application; and (2) have passed the Foundation Examination. However, students possessing any one of the following qualifications are eligible for the direct registration: (1) graduate (including honours) degree with 50% marks in the aggregate; (2) Master’s degree (including PGDBM of the Indian Institutes of Management); (3) graduate degree in engineering; (4) pass in Section “A” and “B” examinations of the Institution of Engineers; (5) pass in Part I and Part II of banking examination (CAIIB). On the basis of reciprocal arrangements with the Institute of Chartered Accountants of India and the Institute of Company Secretaries of India, students who have passed the final examination of any of them, are also exempted from passing the Foundation examination.

It is obligatory on the part of the registered students to undergo and complete satisfactorily a course of tuition, either postal or oral, before they become eligible to appear for the Intermediate or Final examination. Examinations are held in June and December every year. The Board of Studies provides reading material to registered students. Postal tuition is conducted by the Coaching Directorate of the Institute through its four Regional Councils. Oral tuition is imparted by colleges, institutions, and organisations accredited by the Institute for this purpose.

On or before 15^th June for appearing in the December term examination, and (ii) on or before 15^th December of the previous year for the June term examination. Students can undergo coaching (postal of oral) for the June the Final examination only after passing the Intermediate examination. The normal period for completion of postal coaching is 18 months for both the examinations. The students are required to answer a series of test papers under simulated examination conditions within specified time limits. It is absolutely essential that the test papers are answered without making any reference to any reading material. Students passing all the tests are issued the Coaching Completion Certificates by the Board of Studies which entitles them to sit for the examination.

However, there is a modified form of postal coaching for students holding first class postgraduate degree of MBA degree or PGDM. Oral coaching is conducted on semester basis for duration of not less than six months. Students must attend at least 70% of the classes. In each semester, students are required to appear for a written test of three-hour duration for each paper under simulated examination conditions. Candidates have the option to answer questions in Hindi. Candidates are declared successful in each group of the Intermediate and Final examinations if they obtain not less than 35% in each paper and an aggregate of 50% of the total marks for the group.

Admission to Membership

Students passing the Final examination are entitled to be enrolled as Graduates of the Institute before they are admitted as Associate Members. Graduates of the Institute are entitled to use the designation “Grad CWA” after their names to indicate they had qualified in the Final examination but are yet to become Associate Members. Admission to Associate Membership is open to students who have enquired practical experience for a period of not less than three years covering different branches of the discipline. The practical experience may be acquired prior to or after passing the Final examination, or partly before and partly after the examination.

Associate Members can use the initials AICWA after their names to indicate that they are Associate Members of the Institute of Cost and Works Accountants of India. Associate Members can become Fellow Members provided they have been Associated Members for a continuous period of not less than five years and have been practicing continuously in India for at least five years. Fellow Members are entitled to use the letters FICWA after their names to describe themselves as Fellow Members are interested in practicing, they should obtain, in addition, the certificate of practice. This would enable them to practice as cost throughout India.

Members who have completed at least a period of one year as Associate Members are eligible for admission to the Management Accountancy Examination conducted by the Institute. Examinations are held every year in the month of December. Cost Accountancy qualification is not recognised by some universities as a qualification for admission to the PhD course in commerce. (See also Update).

Career Opportunities

Cost and Management Accountant has now become a key corporate functionary in many organisations. In this era of market-driven economy CMAs play a advisory role in framing the business policy of a company or an organisation. Starting as Cost Accountants at a junior level in the corporate hierarchy, they can move up to higher positions functioning as Internal Auditors, Cost Controllers and reach up to the level of Finance Directors or even Managing Directors of companies. The CMAs. Have the lucrative option of practicing as a Cost Accountant after obtaining the certificate of practice.

The types of service that a practicing Cost Accountant can offer are varied. Some of them are: (i) under Section 209 (i) (d) of the Companies Act, over 43 industries are required to maintain cost accounting records, and under Section 233B of the Act cost auditing has also been made mandatory, and only a qualified accountant can undertake these tasks; (ii) certification of import/export documents under the Exim Policy; (iii) excise audit under Section 14A of the Central Excise Act; (iv) Special audit in respect of credit availed under Section 14AAA of the Central Excise Act; and V) acting as a trustee, executor, administrator, receiver, valuer, etc.

Students should acquire a copy of the prospectus which contains detailed information of the ICWAI courses.

Update

University Courses: Three universities offer diploma courses in the subject: (i) University of Kashmir (Srinagar 190006) - PG Diploma in Cost Accountancy,(ii) J N Vyas University (Jodhpur 342001) - Diploma in Cost Accountancy (Duration: Three years, Eligibility: A pass in 10+2), (iii) Rajasthan University (Jaipur 302004) 0 - P G Diploma in Cost & Works Accountancy), and (iv) Maharshi Dayanand Saraswati University (Ajmer 305001) - PG Diploma in Cost and Accountancy.