CMA Inter Paper 6 common mistakes
CMA Inter Paper 6 · Understand the traps and how to avoid them.
When a question says 'as per the Conceptual Framework', candidates answer from the old AS 1/AS 2 memory instead, defining an asset as something 'held for use' or treating prudence as a fundamental qualitative characteristic rather than a supporting notion of neutrality.
Most candidates prepare from older institute material and coaching notes where the 2011/2018 Conceptual Framework distinctions are not clearly separated from the Ind AS framework; the revised definitions of asset (a present economic resource controlled as a result of past events) and liability (a present obligation to transfer an economic resource) are never practised as standalone definitions.
What to do instead
Build a one-page comparison of the old and revised definitions of asset, liability, equity, income and expenses, and of the qualitative characteristics (relevance and faithful representation as fundamental; comparability, verifiability, timeliness, understandability as enhancing). Practise writing the revised definition verbatim, then test each element on a transaction such as a purchase order, a lease deposit, or a contingent liability.
Candidates recompute the whole trading and profit and loss account from scratch in final accounts questions and then present the balance sheet as a balancing figure, instead of treating the trial balance as a control total that must agree after adjustments.
Coaching habit drills the vertical statement format without the discipline of checking that every adjustment has a double entry; the trial balance total is rarely used as a cross-check under time pressure.
What to do instead
After every adjustment, tick it off against both a P&L line and a balance sheet line. Before finalising, verify that the adjusted trial balance still balances by preparing a short working: total debits plus adjustments on the debit side equals total credits plus adjustments on the credit side. Any mismatch points to a one-sided adjustment such as outstanding expense recorded without the corresponding expense.
In partnership admission, retirement and death questions, candidates pass the revaluation profit or loss only to the old partners or only to the continuing partners, and forget to adjust the revaluation gain through the partners' capital accounts before computing the new profit-sharing ratios.
The sequence of steps (revaluation, goodwill, reserves, capital adjustment) is memorised as a list but not as a dependency chain, so candidates apply a later step before completing an earlier one.
What to do instead
Follow a fixed order and label each working: (1) revalue assets and liabilities and share the profit or loss in the old ratio; (2) raise or write off goodwill and share it in the sacrificing or gaining ratio; (3) transfer reserves and accumulated profits in the old ratio; (4) compute the new capitals and settle the cash brought in or paid out. Write the ratio used beside every distribution so an examiner can see the logic.
Candidates treat the issue of shares at a premium, calls in arrears, calls in advance and forfeiture as separate topics, so they credit the securities premium on forfeiture or fail to reverse the premium already received when forfeited shares were originally issued at a premium.
Forfeiture is taught with a single standard journal, and the variant where shares were issued at a premium and the premium was already received (so it is not reversed) or was not received (so it is reversed against the premium account) is under-practised.
What to do instead
Write the forfeiture logic as a rule: debit share capital with the called-up amount, credit the amount already received on those shares, and the balance is credited to the forfeiture account; the securities premium account is debited only to the extent the premium was already credited but not received in cash. Practise three variants: premium fully received, premium called but unpaid, and premium not yet called.
In banking company final accounts, candidates prepare a single statement of profit and loss and a single balance sheet, ignoring the statutory formats in the Third Schedule to the Banking Regulation Act, 1949, with its separate schedules for capital, reserves, deposits, borrowings, and for advances classified as standard, sub-standard, doubtful and loss assets.
Banking accounts are studied as a small chapter at the end of the syllabus, and candidates apply the ordinary Companies Act Schedule III format because it is more familiar.
What to do instead
Memorise the structure of the Third Schedule: Schedule 1 capital, Schedule 2 reserves and surplus, Schedule 3 deposits, Schedule 4 borrowings, Schedule 5 other liabilities and provisions, Schedule 6 cash and balances with RBI, Schedule 7 balances with banks, Schedule 8 investments, Schedule 9 advances, Schedule 10 fixed assets, Schedule 11 other assets, Schedule 12 contingent liabilities. Also learn the income recognition and asset classification norms for non-performing assets, since advances and provisions questions depend on them.
Candidates compute insurance revenue and profit using the accrual of premium without distinguishing between premium earned and premium received, and they omit the change in unexpired risk reserve and the additional reserve required under the regulations when preparing the revenue account of a general insurance company.
The revenue account format is learned as a list of lines without understanding that premium income must be adjusted for the opening and closing provisions for unexpired risk, so the reserve movement is treated as a balance sheet item only.
What to do instead
Write the revenue account in the prescribed order: premium earned (net of reinsurance) less claims incurred, less commission, less operating expenses, plus or minus the change in the provision for unexpired risk and any additional reserve, giving underwriting profit or loss, then add investment income. Practise a small numerical where the unexpired risk reserve changes, so the movement is seen as a charge or credit to the revenue account.
On hire purchase and instalment sale questions, candidates compute total interest correctly but then load it into the cash price in the wrong pattern, allocating equal interest to every instalment instead of applying the ratio of outstanding cash price balances.
The two systems (hire purchase with interest embedded in instalments, and instalment sale where interest is separately charged) are confused, and the ratio-of-outstanding-balances method is replaced by a simpler equal split under time pressure.
What to do instead
Always build a working table with columns for cash price outstanding at the start, interest at the agreed rate on that outstanding balance, instalment received, and closing outstanding. Interest is calculated on the opening balance, never averaged. For instalment sale, record the sale at cash price and interest separately; for hire purchase, record the asset at cash price and the interest as a finance charge over the term.
Candidates answer accounting standard questions by quoting the standard number and a vague principle, without stating the recognition criteria, measurement basis and disclosure requirement that the question actually asks for, and they mix up AS 10 (Property, Plant and Equipment) with Ind AS 16 or AS 2 with Ind AS 2 on measurement.
Standards are revised by reading summaries rather than the standard text, and the differences between the AS and Ind AS series are not tabulated anywhere in the candidate's notes.
What to do instead
For each standard on the syllabus, prepare a three-column card: scope, recognition and measurement rule with the numerical threshold or method, and disclosure. Add a fourth column for the corresponding Ind AS and the key difference. Practise answering in that structure so the response covers all three elements the examiner marks.
In company final accounts, candidates transfer the entire amount of the debenture redemption reserve or the statement of profit and loss balance to the general reserve, and they compute dividend and dividend distribution tax on the pre-appropriation profit rather than on the profit available after transfers.
Appropriations are treated as arithmetic rather than as a legally ordered sequence, and the rules on the debenture redemption reserve (a prescribed percentage of the nominal value of debentures redeemed) are not linked to the redemption schedule.
What to do instead
Write the appropriation section in strict order: transfer to debenture redemption reserve as required by the Companies (Share Capital and Debentures) Rules, transfer to general reserve, dividend on paid-up capital including the interim dividend already paid, tax on distributed profits where applicable, and balance carried to the balance sheet. Compute the reserve on the face value of debentures redeemed, not on the premium.
Candidates leave contemporary-issue questions such as Ind AS transition, revenue recognition under Ind AS 115, leases under Ind AS 116 or CSR accounting unanswered or answer them with general commentary, losing the easy descriptive marks that carry the paper.
Contemporary topics are perceived as optional and are skipped during revision because they appear late in the syllabus and carry fewer numericals, so candidates have no structured answer to fall back on.
What to do instead
Prepare a short brief for each contemporary topic with the five-step revenue model, the right-of-use asset and lease liability computation, the CSR expenditure and provision treatment, and the carve-outs in the Ind AS roadmap. Practise one small numerical for each so the answer contains a computation and not only theory, since descriptive answers with a worked example score higher.