Road to CPA (Part I)

(Road to CPA is three-part series about my journey in my third year in the BS Accountancy curriculum. Basically, this is just a course subject review.)

THE THIRD year of accountancy is the start of the heavy subjects. Yes, it’s really heavy. During first and second years, students only take one major subject. Second-year accounting (Financial Accounting and Reporting 1, 2, and 3) is just a leveled-up version of basic accounting principles with the inclusion of the IFRS and IFRS for SMEs.

Honestly, the first two years are relaxed. I only have to worry about one major subject. But, I regret that I didn’t realize that I had more time when I was in second-year, only to realize it when I reached third-year. (Skip the next paragraph to reach subject review).

Our Grading System

In our curriculum in Silliman University (SU), there are two major subjects and two cluster subjects starting third-year. To explain, cluster subjects are course-related subjects that are included in the grade point average (GPA) computation. The GPA is only computed when one or more subjects has or have a grade below the cut-off point. In SU accountancy, the cut-off point is 71% or 2.3 (the grading system is 4-to-1, where four is the highest and one is the passing). If one subject falls below 2.3, the GPA is computed by getting the weighted average of the clustered subjects. The WA should be equal or above 2.5 (2.46 and up is acceptable as long as it can be rounded to 2.5). If it is 2.5, even though one of the clustered subjects did not pass cut-off point, the student can proceed to the next accounting subjects. If otherwise, the student should wait one whole year to retake the subject (which is sad and depressing).


The third-year subjects are as follows:

ACCOUNTANCY 31 – Cost Accounting 1 & 2 (6 units)

ACCOUNTANCY 33 – Advanced Accounting 1 (3 units)

FINANCE 31 – Financial Management: Short-term finance (3 units)

BUSINESS LAW 51 – Law on Sales, Agency, Labor & Other Credit Transactions (3 units)

For part 1, I will talk about COST ACCOUNTING 1 & 2.


A heavy subject indeed. Aside from the fact that it is a 6-unit subject, cost accounting is a new matter for junior students. For two years of the accountancy program, professors have focused on financial statement preparation and all the topics that fall prior and subsequent to FS presentation.

However, cost accounting arrives like a foreigner in town. This foreigner speaks a different language and has a different culture. Cost accounting is hard at first. Take note, at first. You will be bombarded with new terms like direct material, direct labor, overhead, variable costs, fixed costs, mixed costs, Pareto analysis, process costing, ABC costing, JIT, balanced scorecard, to name a few. Aside from that, most authors utilize abbreviations like DLH (direct labor hours), SP (selling price), CM (contribution), ECO (engineering change order) etc. It’s chaos, but you’ll get it eventually (if you work hard).

We used the book Cost Accounting 2e Philippine Edition by Raiborn & Kinney. Personally, the book is detailed and it contains elaborate examples with relation to real-world events. Unlike Filipino-authored books, the book of Raiborn & Kinney gave me a good foundation in cost accounting. Every line or sentence is important and it contains bits of information that are useful in answering the problems.

Filipino-authored books lack creativity and elaboration. Just don’t me get started with this topic. I have a lot to say, though. But, to avoid this side topic, I would recommend using Cengage or Wiley books for cost accounting. It is content-wise and layout-wise. It encourages reading and provides beautiful illustrations.

Easiest Topic

For me, the easiest topic in the whole of cost accounting is standard costing and variance analysis. Once you know how standard costs work, it would just be a walk in the park. At first, I thought this chapter is the hardest. I don’t get the concept of the overhead variances (the one-, two-, and three-variance approaches). It’s complicated.

But as I tried to really get it, the overhead variances were actually easy as long as you know the concept behind it. A technique that helped be analyze these overhead variances is the determination of what is being compared. This brings the flexible budget in action. The three-variance approach asks for the budgeted amount at actual costs and budgeted amount at standard costs. Before, I always mix up the two. But, as I practice more, I realized that the former uses the flexible budget, budgeted quantity multiplied by actual costs. The latter, however, uses the real budget, budgeted quantity multiplied by standard (or budgeted) costs.

To identify whether if the variance is favorable or not, I use the left to right method. In our book and also in the exam, we used the diagrams to analyze variances. We did not use the formula. For example, you have variances arranged from left to right as A, B, and C. If A minus B is a negative number, then the variance is favorable. If positive, it is unfavorable. This is the easiest way to analyze the favorability of the variance. I couldn’t find any better way than this.

Know the concept of the variance before engaging in problem-solving.

Hardest topics

I think I find relevant costing and transfer pricing hard. Until now, these two topics are gray areas for me. It’s hard for me because it is not a procedural topic. It is analytical and mathematical operations are just tools to arrive at the desired information. These topics heavily rely on knowing what to add or deduct before adding or deducting. Your calculator is useless if you don’t know what figures to add, deduct, or exclude from the analysis.

Also, these two topics are decision-making tools used by cost accountants in aiding management decisions. Because this involves decision-making, exam questions include little computations and more essay. Sometimes, you are just required to explain. It’s too complex and I should do better on these topics when I reach management accounting.

Read…read…read…That’s my only recommendation.

Overall Impact

Cost accounting is manageable as long as you know how to manage your time. It is a computation-based subject. There are a lot of computations involved here, and a lot of essays too. But, the subject difficulty is 7/10 in my own opinion. Understanding the concept is hard at first, but during the review for final exams and the boards, it would just be a refresher.


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