And what you also may know is that many people struggle to pass the CMA exam. In fact, candidates have traditionally struggled the most with Part 1, with CMA pass rates averaging as low as 35-45% over the past few years.
This may be because CMA accounting candidates do not fully understand what is expected of them from each part of the exam.
To help you prepare like a rockstar, I will be breaking down everything you need to know about CMA Exam Part 1. Don’t worry; I will be dissecting CMA exam part 2 as well — stay tuned!
Skills Required to Pass CMA Part 1
The Institute of Certified Management Accountants prepares Content Specification Outlines (CSOs) that list the topics candidates will be tested on. Each subject is designated a “level”; A, B or C. These levels refer to the degree of coverage expected in each topic.
For example, Level A requires knowledge and comprehension. Level B requires knowledge, comprehension, application, and analysis. Level C requires six outlined skill levels, including knowledge, comprehension, application, analysis, synthesis, and evaluation.
Fun fact: the CMA exam tests you at a skill level C for all areas; meaning you must fully understand all the material.
What exactly do these skills require of you?
- Knowledge: Ability to recall material you previously learned
- Comprehension: Ability to interpret and explain material
- Application: Ability to demonstrate the use of material in a situation
- Analysis: Ability to break down material or recognize relationships between components and identify critical elements
- Synthesis: Ability to form hypotheses from different parts of material to create new operations
- Evaluation: Ability to criticize, justify and come to conclusions on material
CMA Exam Part 1 Syllabus
Part 1 of the CMA certification test covers Financial Planning, Performance, and Analytics.
This 4-hour long exam is comprised of 100 multiple-choice questions and two essay questions. I prefer to call these essay “scenarios,” as each question requires you to present written and quantitative responses.
Six topics are covered in CMA Part 1:
- External Financial Reporting Decisions 15%
- Planning, Budgeting, and Forecasting 20%
- Performance Management 20%
- Cost Management 15%
- Internal Controls 15%
- Technology and Analytics 15%
Content Specification Outlines for Part One
Now that you know what topics are going to be covered, let’s talk a little bit more about what precisely you need to know.
External Financial Reporting Decisions
Making up 15% of the exam material, you will be tested on Financial Statements, and Recognition, Measurement, Valuation, and Disclosure.
In terms of Financial Statements, you should be comfortable with:
- Balance Sheets
- Income Statements
- Statement of Changes in Equity
- Statement of Cash Flows
- Integrated Reporting
For Recognition, Measurement, Valuation, and Disclosure, you need to understand:
- Asset Valuation
- Valuation of Liabilities
- Equity Transactions
- Revenue Recognition
- Income Measurement
- Significant differences between U.S. GAAP and IFRS.
Please note that you will be required to understand how Financial Statements and Recognition, Measurement, Valuation, and Disclosure relate to one another. This should be reasonably straightforward, especially if you have any accounting experience.
Planning, Budgeting, and Forecasting
This section makes up 20% of CMA Part 1 and covers six areas of competency.
1. Strategic planning
In this section, you will need to understand everything that goes into strategic planning, such as :
- Analysis of internal and external factors affecting strategy
- Long-term mission and goals
- Alignment of tactics with long-term strategic goals
- Analytical techniques and Strategic planning models
- Characteristics of successful strategic planning process
2. Budgeting Concepts
Not to be confused with budgeting methodologies, budgeting concepts includes:
- Operations and performance goals
- Characteristics of a successful budget process
- Resource allocation
- Other budgeting concepts
3. Forecasting techniques
Make sure you brush up on the following to tackle this section:
- Regression analysis
- Learning Curve analysis
- Expected value
4. Budgeting methodologies
There are many different ways to budget. Make sure you understand the difference between:
- Annual business plans (master budgets)
- Project budgeting
- Activity-based budgeting
- Zero-based budgeting
- Continuous (rolling) budgets
- Flexible budgeting
5. Annual profit plan and supporting schedules
Planning is essential, and this concept covers the following types of budgets:
6. Top-level planning and analysis
This section will dive into topics like:
- Pro forma income
- Financial statement projects
- Cash flow projections
Making up 20% of your Part 1 exam, this section covers three main areas:
Cost and Variance Measures
- Comparison of actual to planned results
- Use of flexible budgets to analyze performance
- Management by exception
- Use of standard cost systems
- Analysis of variation from standard cost expectations
Responsibility Centers and Reporting Segments
- Types of responsibility centers
- Transfer pricing
- Reporting of organizational segments
- Product profitability analysis
- Business unit profitability analysis
- Customer profitability analysis
- Return on investment
- Residual income
- Investment base issues
- Key performance indicators (KPIs)
- Balanced scorecard
To nail this part you should understand the ins and outs of actual vs. planned results, how to use flexible budgets to analyze performance, and be able to analyze cost expectations
Additionally, you will need to know the different types of responsibility centers and how to analyze profitability and return on investment using key performance indicators.
For 15% of the mark, you must be able to complete calculations related to various costing methodologies.
The core concepts covered are:
- Cost behavior and cost objects
- Actual and normal costs
- Standard costs
- Absorption (full) costing
- Variable (direct) costing
- Joint and by-product costing
- Job order
- Fixed and variable overhead expenses
- Plant-wide vs. departmental overhead
- Determination of allocation base
- Allocation of service department costs
Supply Chain Management
- Lean resource management techniques
- ERP – Enterprise Resource Planning
- Theory of constraints
- Capacity management and analysis
Business Process Improvement
- Value chain analysis
- Value-added concepts
- Process analysis, redesign, and standardization
- Activity-based management
- Continuous improvement concepts
- Best practice analysis
- Cost of quality analysis
- Efficient accounting processes
This section can be tricky because the concepts covered are mostly conceptual. Candidates may struggle to find the right answer when there are several that seem correct. Worth 15% of the exam, make sure you pay attention to the below topics when studying to make sure you understand them.
Governance, Risk, and Compliance
This topic covers risk control and policies for safeguarding assurances internally, as well as external audit requirements and corporate governance. Specifically:
- Internal control structure and management philosophy
- Internal control policies for safeguarding and assurance
- Internal control risk
- Corporate governance
- External audit requirements
Systems Controls and Security Measures
This section covers all sorts of controls from network to backup controls, as well as business continuity planning. Here’s the full list:
- General accounting system controls
- Application and transaction controls
- Network controls
- Backup controls
- Business continuity planning
Technology and Analytics
The final 15% of CMA Part 1 covers information systems, data governance, technology-enabled finance transformation, and data analytics.
Obviously, the focus is on analytics and how accounting technology plays a part in it, so be sure to understand accounting information systems, data policies and procedures, process automation and applications, and business intelligence. Here’s the full breakdown:
- Accounting information systems
- Enterprise resource planning systems
- Enterprise performance management systems
- Data policies and procedures
- Life cycle of data
- Controls against security breaches
Technology-Enabled Finance Transformation
- System Development Life Cycle
- Process automation
- Innovative applications
- Business intelligence
- Data mining
- Analytic tools
- Data visualization
How to Pass CMA Part 1 Multiple-Choice Questions
It has been my experience that some people love the CMA exam multiple-choice questions (MCQ), while others get flustered and make silly mistakes.
If you are the latter, then you may want to follow these quick tips for crushing the MCQ section, and it all starts with understanding the structure.
MCQs are often devised of 3 parts; the question stem, the correct answer, and of course, distractor answers.
The question stem refers to the necessary details being asked of you to answer the question. This stem is often surrounded by irrelevant information, so make sure to identify the stem before considering your options.
Make sure to identify any negative statements, such as “except” or “false,” that may confuse you while answering
It goes without saying that the correct answer choice is the right choice, but sometimes it may not be so clear when your distractor questions may seem to be good choices also.
You will likely come across questions that propose a combination of correct answers, for example, “all of the above” or even something like “Answers 1, 3 and 4 is all correct.” In these scenarios go back to your stem question and underline and qualifiers that may help lead you to the right answer.
Please note that you must get at least 50% of the multiple-choice questions correct in order to move on to the essay section, so take your time and be thorough.
Understanding the Essay Section
As I mentioned earlier, the essay section is made up of two questions or scenarios. You will be expected to answer multiple questions that comprise this scenario, and you will likely have to perform calculations in addition to writing paragraphs.
The essay section is graded by experts and not done by computers, so it is best to write as much as you can on a topic to maximize your points.
The same goes when writing out calculations. You can receive partial points for a calculation even if you make a mathematical error, simply by showing your work. A few points are better than none.
Passing the CMA Exam Part 1
I know I’ve given you a lot to digest, but don’t feel overwhelmed. Part 1 of the CMA exam requires you to have a clear understanding of core concepts and be able to identify the subtle differences between them.
One of the best ways to gain confidence before taking the exam is to follow a study plan and take advantage of practice exams.
High-quality CMA review courses like CMA Exam Academy give candidates the framework for studying for success.
By investing a reasonable amount of time in your studies and taking several practice exams to identify your strengths and weaknesses, you will be well on your way to passing CMA Part 1.
If you aren’t sure where to begin, hit me up in the comment section below. I am here to help you crush the exam on your very first try!