CMA Foundation Fundamentals of Financial and Cost Accounting (Paper 2)

How to prepare Fundamentals of Financial and Cost Accounting

1. Start with the base chapters: accounting frameworks, principles, concepts and conventions, and capital versus revenue. These are mostly theory. Make a one-page note of each concept with a simple Indian example, such as a shop buying furniture versus paying rent.
2. Master the accounting cycle, journal and ledger. Learn the golden rules of debit and credit for personal, real and nominal accounts. Do at least 10 journal entries a day until you can do them without looking at the rules.
3. Move to the books and checks: cash book, bank book, petty cash book, bank reconciliation statement, trial balance, adjustments and rectification of errors. For the bank reconciliation, learn which items raise or lower each balance, and practise starting from both the cash book and the pass book balance.
4. Learn the specific topics one by one: depreciation (straight line and diminishing balance), bad debts and provision for doubtful debts, consignment, joint venture and bills of exchange. For each, write the formula or entry format on a card and solve 8 to 10 small problems with clean numbers.
5. Study the financial statements of a sole proprietorship and of a not-for-profit organisation. Practise preparing the trading account, profit and loss account and balance sheet, and the receipts and payments account to income and expenditure account conversion. Check that your balance sheet tallies every time.
6. Cover cost accounting: meaning and significance, its link with financial accounting, uses for business decisions, cost centre, cost unit and cost drivers, classification of costs under CAS 1, and the cost sheet. Learn the cost classifications by nature, function and behaviour. Then solve cost sheet problems until the format is automatic.
7. Revise in cycles. After finishing all chapters, spend one week on chapter-wise MCQs, then take full 50-question papers in 1 hour. Keep an error log of every wrong answer and the reason, and revisit it before each new test.
8. In the last week, do no new topics. Revise your rule cards, formats and error log, and take two or three timed papers. Practise filling an OMR sheet so that this is not new on exam day.

Time management in the exam

• →You have 1 hour for 50 questions, which is about 70 seconds per question. Use this as a guide, not a rule. Theory questions should take 20 to 30 seconds, which leaves time for the calculations.
• →Go through the paper once and answer every question you are sure of. Mark the long numerical ones lightly and return to them. Do not get stuck on one question for more than 2 minutes.
• →For numericals, check the options first. Often two options can be dropped quickly by checking the nature of the answer, such as whether the result must be a profit or a loss, or whether a balance must be higher or lower.
• →Do rough work in a tidy way. Write each step in order so that you can recheck a calculation quickly instead of redoing it.
• →Since there is no negative marking, answer every question. In the last 5 minutes, fill in an option for any unanswered question after eliminating what you can.
• →Papers 1 and 2 are in one 2-hour session. Keep to 1 hour for each paper as a target, and set aside the last few minutes to check that your OMR bubbles match your answers.