CMA Exam Part 1 is all about financial reporting, planning, performance and internal control. If you took CPA exam before, it feels like an intro version of FAR, a bit of AUD in terms of internal control, and a big, and more in-depth version of BEC.
There are five sections:
- 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 section has been added to the CMA exam since January 2015. It covers the basis of financial accounting, including preparation of financial statements, valuation of assets and liabilities; operating and capital leases; impact of equity transactions; revenue recognition; income measurement; major differences between U.S. GAAP and IFRS.
Candidates are required to understand and remember the items in balance sheet, income statement, statement of changes in equity, statement of cash flows, and how they relate to each other.
If you have studied any accounting before, this should be a relatively straightforward section. I suspect that most of the questions are computational.
B. Planning, Budgeting and Forecasting
Budgeting is the biggest section in CMA Exam Part 1. It covers strategic planning process; budgeting concepts; annual profit plans and supporting schedules; types of budgets; top-level planning and analysis; and forecasting.
Candidates are expected to calculate the various items such as cost of goods sold, cost of goods manufactured and other items in the budget, as well as some conceptual questions such as the definition on budgeting. The coverage is more in-depth than that in Section A. The concepts are not difficult, but multiple choice questions can get lengthy and complex in some budgeting scenarios.
My tips for you is to read the questions slowly and get familiar with how questions are presented. Once you are used to the format and the type of calculations to be performed, the accuracy rate goes up dramatically.
C. Performance Management
In this section candidates are tested on the ways performance is evaluated in a corporation. This includes factors for performance evaluation, variance analysis based on flexible budgets and standard costs; responsibility accounting; key performance indicators and balanced scorecards.
Most of the evaluation tools should be familiar to those who work in accounting department in a corporation. There are certain elements, such as standard costs, that are used mostly in manufacturing companies as opposed to service oriented companies. If you are working in a financial institution or other service companies, you may want to spend more time in understanding the standard cost concept.
D. Cost Management
This is also an important section representing 20% of the exam. The first part of this section covers cost concepts, flow and terminology. Then we move on to alternative cost objectives; cost measurement concepts; cost accumulation systems; overhead cost allocation; supply chain management and business process performance.
The focus of this section includes the various costing methodologies such as job order costing, process costing, and activity-based costing. You are expected to be able to complete a full set of calculation. You should also be familiar with topics such as lean manufacturing, ERP, theory of constraints, value chain analysis, ABM, continuous improvement and efficient accounting processes.
E. Internal Controls
Internal controls is the last section representing 15% in CMA Exam Part 1. It covers corporate governance; internal control risk; internal control environment, procedures, and standards; responsibility and authority for internal auditing; types of audits; assessing the adequacy of the accounting information system controls; and business continuity planning.
Internal controls questions are almost all conceptual. They are not difficult to understand, but the questions could be ambiguous and it’s pretty hard if you have to pick the best answer when a few seem to be somewhat correct. Don’t get frustrated if you think you breeze through the section, only to find that you do poorly in the practice questions. It happened to me back then, but things start to click once I stayed focus and reworked on the tough questions that I did wrong previously.
Summary of CMA Exam Part 1 in Video
I create this video going through the syllabus and exam content in detail.
Syllabus Overlap with Other Professional Exams
For those who are deciding between different qualifications, or want to leverage the knowledge they gain from a professional exam they just took, here is the good news.
There are quite a few overlap in the following accounting and finance exams:
The biggest section in CFA Level 1, the Financial Reporting and Analysis (FRA), is essentially the same as Section A of the CMA Part 1 exam. While the knowledge base is the same, focus is slightly different: CFA more from analytical perspective, while CMA more from a reporting perspective.
Section A is the lite version of FAR in CPA exam. In other words, if you pass FAR, you shouldn’t have any issues with this part of the exam.
A big part of Section E on Internal Control overlaps with AUD section of the CPA exam. Section E covers primarily the role of internal control within the company, while for AUD it is more in the external auditor’s perspective.
Some elements of Section B, C, D are covered in BEC section of the CPA exam. In this case the CMA exam is more in-depth but you will encounter similar questions on strategic planning and cost accounting in BEC.
The Internal Control section shares the same fundamental concepts in the internal audit exam. The CIA exam goes a lot deeper in its own niche, but they share lots of exam content and even the style of questions (that they are conceptual and not very clear cut).
Final Thoughts on CMA Part 1
There aren’t many things that you need to memorize in CMA Exam Part 1. But you need to be clear in the concepts and be able to tell the subtle difference between them. Some of the questions are very lengthy. Don’t get frustrated – spend the time you need to complete the calculation. If you are running out of time, skip and mark the long questions and work on the short ones first.
The historical pass rate of CMA Exam Part 1 is around 35%. The exam is not getting easier now that the syllabus is expanded to cover financial accounting. But if you keep working on the practice questions, understand the underlying concepts, rework the ones you got wrong previously… the chance of success is very high. Best of luck to your exam!
For Your Information
- CMA exam study and exam taking tips
- Frequently asked questions on the CMA exam
- CMA exam handbook from IMA