Key Topics/ Principles to Pass Management Accounting

The whole Management Accounting syllabus and the examination are premised on three key principles.

Your ability to understand the concepts relating to these principles will either help you pass the examination or keep writing until you give up.

What are these topics?

  1. Absorption Costing:

The absorption of overheads is fundamental to the subject as accounting of overheads is one of the key topics to enable you successfully understand Cost sheet/profit statement, budgeting, variance analysis, investment appraisal and transfer pricing.

  1. Marginal Costing:

The alternative approach to accounting for overhead is using the marginal costing principle which deals with relevant production costs. In addition to the above topics mentioned under absorption costing, this principle is crucial to Short Term Decisions, a major topic in the Management Accounting examination.

  1. Activity Based Costing (ABC)

The limitation of the absorption costing approach is that, it accounts for overheads in general terms without taking into consideration the actual activities. With ABC, you account for the overhead to cost centres and cost units using Cost Pool (the major activities) and Cost Drivers (what causes the costs)

This principle is also relevant to transfer pricing, cost sheet preparation, among others.

So, there you have it!!!!

Do you want to pass your Management Accounting Examination?

I know you said YES!!!!!!

Study thse principles FIRST.