CS Professional CMADD flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Break-even point

The level of sales at which total revenue equals total cost, resulting in neither profit nor loss. Calculated as Fixed Cost ÷ Contribution per unit, or Fixed Cost ÷ P/V ratio.

P/V ratio

Profit-volume ratio measures contribution as a percentage of sales. Formula: (Sales − Variable Cost) ÷ Sales × 100. Used to compute break-even sales and margin of safety.

Margin of safety

Excess of actual sales over break-even sales. Represents cushion available before losses occur. Formula: Actual Sales − Break-even Sales; Profit = Margin of Safety × P/V ratio.

Material price variance

Difference between standard price and actual price of materials, multiplied by actual quantity purchased or used. Formula: (Standard Price − Actual Price) × Actual Quantity. Favourable if actual price is lower.

Labour efficiency variance

Measures difference between standard hours allowed for actual output and actual hours worked, valued at standard rate. Formula: (Standard Hours − Actual Hours) × Standard Rate.

Absorption costing profit difference

Profit under absorption costing differs from marginal costing by fixed overhead carried in inventory. Difference = (Closing stock − Opening stock) × Fixed overhead absorption rate per unit.

Prime cost

Sum of direct material cost, direct labour cost and direct expenses. It is the first element of cost in a cost sheet and excludes all overheads.

Residential status of individual

An individual is resident if stay in India is 182 days or more in the previous year, or 60 days or more in the previous year and 365 days or more in the four preceding years.

Place of effective management

POEM is the place where key management and commercial decisions necessary for conduct of business are made. A foreign company is resident in India if its POEM is in India.

Section 80C deduction

Deduction from gross total income for specified investments and payments such as life insurance premium, PPF, EPF, tuition fees, and principal repayment of housing loan, subject to maximum ₹1.5 lakh.

Section 112A capital gains

Long-term capital gains on listed equity shares and equity-oriented funds exceeding ₹1 lakh are taxed at 10% without indexation, provided securities transaction tax is paid.

Advance tax instalments

Advance tax is payable in four instalments: 15% by 15 June, 45% by 15 September, 75% by 15 December, and 100% by 15 March of the financial year.

TDS on professional fees

Under section 194J, tax is deducted at source at 10% on fees for professional or technical services, royalties, and non-compete fees when payment exceeds ₹30,000 in a financial year.

Ind AS 115 revenue model

Five-step model: identify contract with customer; identify performance obligations; determine transaction price; allocate price to obligations; recognise revenue when each obligation is satisfied.

Impairment loss

Under Ind AS 36, impairment loss is the amount by which carrying amount of an asset exceeds its recoverable amount, which is higher of fair value less costs of disposal and value in use.

Basic earnings per share

Ind AS 33 measure calculated as profit or loss attributable to ordinary shareholders divided by weighted average number of ordinary shares outstanding during the period.

Control under Ind AS 110

An investor controls an investee when it has power over the investee, exposure to variable returns, and ability to use its power to affect those returns. Control requires consolidation.

Reportable segment

Under Ind AS 108, a segment is reportable if its revenue, profit or loss, or assets are 10% or more of the combined totals, and segments must cover at least 75% of external revenue.

GST registration threshold

Registration is required when aggregate turnover exceeds ₹40 lakh for goods and ₹20 lakh for services (₹20 lakh and ₹10 lakh respectively in special category states).

Time of supply for services

For services, time of supply is earlier of date of invoice (if issued within 30 days of supply) or date of payment, whichever is earlier; reverse charge cases have separate rules.

Blocked input tax credit

Under section 17(5) of CGST Act, ITC is not available on motor vehicles for passenger transport (seats up to 13), food and beverages, club membership, and works contract for immovable property.

GSTR-3B return

Monthly (or quarterly under QRMP) summary return for outward supplies, ITC availed, and tax payment, due by 20th of the following month for monthly filers.

Customs assessable value

Value under section 14 of Customs Act is transaction value, including cost of transport, insurance, and loading up to port of import; landing charges of 1% added if not included.

Social Welfare Surcharge

A duty levied at 10% of basic customs duty on imported goods, introduced in 2018 to fund social welfare schemes; certain goods are exempt.

Activity-based costing

Costing method that assigns overhead costs to activities based on cost drivers, then allocates to products. Activity hierarchy includes unit-level, batch-level, product-level, and facility-level.

Target costing

Method where target cost is derived by subtracting desired profit margin from competitive market price. Cost reduction is achieved through value engineering and functional analysis.

Life-cycle costing

Accumulates all costs over a product's life cycle from research and development through design, manufacturing, marketing, distribution, service, and disposal. Majority of costs committed at design stage.

Balanced Scorecard

Performance framework by Kaplan and Norton using four perspectives: financial, customer, internal business process, and learning and growth, linked causally through a strategy map.

Theory of Constraints

Goldratt's management approach: identify the bottleneck, exploit it, subordinate everything else to it, elevate it, and repeat. Throughput accounting focuses on throughput, inventory, and operating expense.

Minimum transfer price

Lowest price at which a selling division should transfer goods internally. Equals variable cost plus opportunity cost of the transfer, ensuring goal congruence.

Cost of quality

Total of prevention costs, appraisal costs, internal failure costs, and external failure costs. Optimal quality level occurs where total quality cost is minimised.

Economic value added

EVA = Net operating profit after tax (NOPAT) − (WACC × Invested capital). Measures value created above the cost of capital employed.