CMA Self Study
حسابات العملاء Accounts Receivable
الالات والمعدات Property, Plant and Equipment
Intangible and Other Assets
Valuation of Liabilities
Accounting for Income Taxes
Differences Between U.S. GAAP and IFRS
Section B, Planning, Budgeting and Forecasting, represents 30% of the exam and is the largest part of the
Section C, Performance Management, is 20% of the exam. Section C covers variance analysis and
Section D, Cost Management, is also 20% of the exam. Section D focuses on costing systems and covers a
Section E, Internal Controls, represents 15% of the exam. The fact that it represents “only” 15% of the exam
business undertakes. The objective of financial reporting is to provide financial information about the entity
that is useful for decision-making. Those using the financial information to make decisions include present and potential equity investors, lenders, and other creditors who need to make decisions about providing resources to the entity. The decisions relate to buying, selling, or holding debt or equity instruments and providing credit.
In order to make these decisions, investors, lenders and other creditors need information that will help
them assess the amount of, timing of, and prospects for future net cash inflows to the entity. 1
Other users who may or may not be providing capital to the firm, such as management, employees, financial
analysts and regulators find the financial statements useful, as well.
The types of decisions that these individuals are making are numerous and varied. It is not possible for
accounting information to provide all of the necessary information that users need to make their decisions.
Users need to access information from other sources, as well, such as economic forecasts, the political
climate, and industry outlooks. 2 However, the financial statements do attempt to provide as much useful
information as possible to the users.
Financial Statements* Users of Financial Information
Published financial information must be in compliance with the established accounting guidelines because
outside users will rely on it to make a variety of decisions. These rules and standards are in place to protect
outside users by ensuring that the information is accurate and useful and can be understood by everyone.
Because so many people are using the financial information and they are using it for so many diverse
purposes, the reasons that people need the financial information are also diverse, such as to:
• Make investment decisions.
• Extend credit or not.
• Assess areas of strength and weakness within the company.
• Evaluate performance of management.
• Determine whether or not the company is in compliance with regulatory requirements.
Users of financial information can be classified by various distinctions:
Direct vs. Indirect Users – Direct users are those who are directly affected by the results of a company.
Direct users include investors and potential investors, employees, management, suppliers and creditors.
Direct users are individuals who stand to lose money financially if the company has financial problems.
Indirect users are those people or groups who represent direct users. They include financial analysts and
advisors, stock markets and regulatory bodies.
Internal vs. External – Internal users make decisions within the firm whereas external users make decisions
from outside of the firm about whether or not to begin a relationship with the firm, continue a relationship
with the firm, or change their relationship to the firm
Note: Users of financial statements are assumed to have a reasonable knowledge of business and
economic activities and to be willing to study the information with reasonable diligence. This is an
important assumption because it means in the preparation of financial statements, a reasonable level of
competence on the part of users can be assumed. Someone who has a reasonable understanding of
business, accounting and economic activities should be able to read the financial information that is
presented and understand it.
The Financial Statements
The five financial statements used under U.S. GAAP are:
• Balance Sheet (also called the Statement of Financial Position.
• Income Statement.
• Statement of Cash Flows.
• Statement of Comprehensive Income.
• Statement of Changes in Stockholders’ Equity.
Note: The notes to the financial statements are also considered an integral part of the financial statements
but are not an actual financial statement. The purpose of the notes is to provide informative disclosures
that are required by GAAP.
Note: A company can also prepare prospective financial statements. Prospective financial statements
are financial statements that are based on a set of assumptions and cover a future period. Whenever
prospective financial statements are prepared, the significant accounting policies and significant
assumptions that were made need to be disclosed. Prospective financial statements can also be called
pro forma financial statements.