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CMA (US) Examination Details – Part 1
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Dual Certification – What, Why

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Employment in the accounting field means a highly profitable and successful career. The question is how much more profitable a career as a professional with a CMA (US) certification comparatively. The salary survey conducted by the IMA in 2014 shows that CMAs earn...

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What to Do After the Exam

For candidates who are curious about what they should do after the examination, there is just one answer: relax. Nothing is more important than to use this time to relax. This examination is not easy to prepare for or to attempt, thus, the candidates who have done so...

Part 1 of the CMA (US) examination consists of financial reporting, planning, performance, and internal control. A candidate may find this like an introduction to the FAR section, a bit like the AUD section with regards to internal control, and a detailed, in-depth version of the BEC section of the CPA examination if he or she would have taken it before.

Part 1 is divided into five sections. The percentage in the brackets represent the number of questions pertaining to that topic:

  • External Financial Reporting Decisions (15%)
  • Planning, Budgeting, and Forecasting (30%)
  • Performance Management (20%)
  • Cost Management (20%)
  • Internal Control (15%)

A. External Financial Reporting Decisions

This is a new section in the examination. It covers the base of financial accounting, which includes preparation of financial statements, assets and liabilities valuation, operating and capital leases, equity transactions and their impact on the business, recognition of revenue, measurement of income, and the major differences between the accounting principles—GAAP of the USA and the IFRS.

Candidates are required to interpret and understand the items on the balance sheet, income statement, statement regarding changes in equity, cash flow statement, and the relationship among all these financial statements. Candidates who have studied accounting as a subject before would find this section straightforward.

B. Planning, Budgeting, and Forecasting

As mentioned above, this section has the most weightage in the examination. It covers the process of strategic planning, budgeting concepts, profit plans for the year and supporting schedules, different types of budgets, top-level planning and analysis, and forecasting.

Candidates are required to calculate several financial items like the cost of goods manufactured, cost of goods sold among other items in the budget. This section also contains conceptual questions such as the definition of budgeting and other terms related to it. Since this is the largest section of Part 1, the questions go in-depth and become lengthy and complex.

It is advised to go slowly in this section; as the familiarity with the section increases, the accuracy of calculations and answers also increases.

C. Performance Management

This section contains questions regarding the different ways to evaluate the performance of a business, including factors for performance evaluation, responsibility accounting, variance analysis based on flexible budgets and standard costs, key indicators of performance, and balanced scorecards.

Candidates who have worked in the accounting division of a company would find most of the evaluation tools familiar. However, a few elements such as standard costs would not be familiar to these candidates as they are used in manufacturing firms rather than service firms. It is advised to spend more time to understand the concept of standard costs.

D. Cost Management

This section accounts for 20% of the examination. It covers cost concepts, flow, and terminology, cost objectives, cost accumulation systems, concepts of cost measurement, overhead cost allocation, supply chain management, and business process performance.

It focuses on job order costing, activity-based costing, and process costing. Candidates must be familiar with concepts such as ERP, lean manufacturing, value chain analysis, the theory of constraints, continuous improvement, ABM, and efficient accounting processes.

E. Internal Controls

The last section of Part 1 represents 15% of the total. It covers internal control risk, corporate governance, procedures and standards, internal control environment, types of audits, responsibility and authority for internal auditing, assessment of the adequacy of accounting information system controls, and business continuity planning.

The questions are mostly conceptual and simple to understand, although the answers could be ambiguous in nature.

 

In conclusion, there is not much rote-learning in Part 1 of the examination. The questions are conceptual and require candidates to be clear with each of them and must be able to tell between the subtle differences among them. Questions are lengthy; it is advised to do the calculations carefully to avoid any errors and work on the long questions before the short ones if the candidate is running out of time.

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