CMA Part 1 Demystified: Your Definitive Guide

cma exam part 1

As you know, the Certified Management Accounting exam is comprised of two parts. Each part is designed to test your knowledge and understanding of core competencies in management accounting.

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 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

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%
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Content Specification Outlines for Part One

Content Specification Outlines for Part 1

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:

  • Operational
  • Financial
  • Capital

6. Top-level planning and analysis

This section will dive into topics like:

  • Pro forma income
  • Financial statement projects
  • Cash flow projections

Performance Management

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

Performance Measures

  • 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.

Cost Management

For 15% of the mark, you must be able to complete calculations related to various costing methodologies.

The core concepts covered are:

Measurement concepts

  • Cost behavior and cost objects
  • Actual and normal costs
  • Standard costs
  • Absorption (full) costing
  • Variable (direct) costing
  • Joint and by-product costing

Costing Systems

  • Job order
  • Process
  • Activity-based
  • Life-cycle

Overhead costs

  • 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

Internal Controls

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:

Information Systems

  • Accounting information systems
  • Enterprise resource planning systems
  • Enterprise performance management systems

Data Governance

  • Data policies and procedures
  • Life cycle of data
  • Controls against security breaches

Technology-Enabled Finance Transformation

  • System Development Life Cycle
  • Process automation
  • Innovative applications

Data Analytics

  • Business intelligence
  • Data mining
  • Analytic tools
  • Data visualization

How to Pass CMA Part 1 Multiple-Choice Questions

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

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

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!

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29 Comments on “CMA Part 1 Demystified: Your Definitive Guide”

    1. Since the US CMA is a global certification, it doesn’t matter where you take the exam – the value of the certification will be the same.

      So yes, as a CMA, you’ll have the knowledge and skills to land a management accounting position abroad and excel at it.

  1. Hi Nathan,

    Could you help me in how to pass in CMA 2nd trial for Part-A, How Much time i have to spend to understand the concepts and how to apply on the exam day. What is the best way to pass in the Exam?!.

    Thanks and regards
    Sudhha

    1. Hi Sudhha,

      I have a YouTube video in which I go over the best study strategies to help you pass the exam. You can watch it here.

      And here are more study strategies to help you score the most points on the MCQ and the essay section of the CMA exam.

      I hope this helps, Sudhha. If you have any other questions, please don’t hesitate to hit reply.

      Thank you,
      Nathan

  2. Hi Nathan,

    Hope you are doing well.

    I have to start CMA please guide me about study material and scheduled.
    currently i am working as an accounts receivable.

    Thanks.

    1. Hi Noman,

      I’m well, thank you. I hope you’re well too!

      If you’d like to study with me, you can enroll in my complete course here.

      Within this course, you’ll have access to all the study tools you need to successfully prepare for the exam, and I’ll guide you every step of your entire CMA journey so you never feel stuck 🙂

      This course is designed to be completed in 16 weeks (one module per week) and it takes around 15 hrs/week to complete one module. Taking four months to study for each part of the exam will give you ample time to learn everything you need to know for the exam, and it’s long enough for you to consume all the material without forgetting key topics.

      If you have any other questions Noman, please don’t hesitate to hit Reply.

      Thank you,

  3. Hi Nathan,
    I planning to start CMA, What are the complete charges for part I & II and I’m salaried person, can I pay by monthly easy installment because one go payment cannot easy for me to pay.
    And also need your step by step help or guidance to finish this course.
    Thank you
    Safdar

    1. Hi Safdar,

      Yes, you can opt for a payment plan when enrolling in our course. Click here to check the details.

      As an Academy student, you’ll be guided by me and my team through every step of your CMA journey until you successfully pass the exam.

      If you have any questions, just hit reply.

      Thanks,
      Nathan

  4. Hi …..i completed my part 2 and now preparing for part 1 and also i am working ……. would you please help me to give a start on my studies which i really lack .. and suggest me on which to start with …. and which should i give more focus on as in exam point of view .

    Thank you

    1. Hi Elja,

      I recommend studying every section from your textbook one by one and taking 50-MCQ practice exams of each section until you consistently score above 80% on them – that’ll be a good indicator that you’ve mastered that section and are ready to move on to the next one.

      Then practice on exam simulations of the entire part until you score above 80% on them too – that’s when you’ll know you’re ready to pass the real exam.

      Good luck!

  5. Hi Nathan,

    I planning to start CMA by self study and i have a material, i need to know if can purchase just the test bank questions?

    Thank you

  6. Hi Nathan
    I want to know what all charges for the registration for Cma ,as my Registration is expired. And any changes in exam fee in the coming year, can you brief me all the charges connected with Cma part and part 2
    Thanks
    Tony Thomas

    1. Hi Tony,

      Here’s the list of fees you’ll need to pay to sit for the exam:
      1. IMA Membership: $230/year, or $39/year if you’re a student – it’s an annual payment.
      2. CMA entrance fee: $250 for professionals, or $188 for students.
      3. Registration fee for one part of the CMA exam: $415/part, or $311/part for students.

      Thanks,
      Nathan

  7. Hi Nathan,

    This is Rashesh and if you could kindly give some inputs on the new Data Analytics subject as to what it covers in the Part 2 exam.

    Thanks

    1. Hi Rashesh,

      Data Analytics is not covered in Part 2 syllabus. You can read the breakdown of all topics tested in Part 2 here.

      Let me know if you have any other questions, Rashesh!

  8. Has this course considered the changes in 2020 Exam Structure? Also, where did you get the example questions for the new modules (eg: Technology and Analytics?)

    1. Hi Meity, yes our program has been updated for the 2020 exam. The IMA released sample questions for the new topics tested in 2020 which we are using our study material and also writing new questions based on those sample questions. Thanks, Nathan

  9. Hi Nathan,

    Could you please make me understand the difference between between Part 1 topic external financial reporting decision and Part 2 financial reporting analysis.

    Thanks and regards,
    Rashesh

    1. Hi Rashesh,

      Sure! Section A in Part 1 focuses primarily on the valuation of assets, liabilities and equity. Section A in Part 2 focuses primarily on company performance using financial ratios.

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