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مشاهدة النسخة كاملة : Financial Accounting Summary



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10-16-2014, 10:17 AM
Financial Accounting – Summary Notes
Financial Accounting – Summary Notes 1
Financial Statement Basics 3
Understanding of the 3 financial statements – (balance sheet, income statement and statement of cash flows). What does each financial statement represent? 3
What is the structure of each statement? 3
What is the link between the three statements? 4
Understanding of the basic mechanics of financial accounting – (debits, credits, transaction journal entries, adjusting entries, closing entries, t-accounts, trial balances and financial statements) 4
Balance sheet 6
How are assets and liabilities valued on the balance sheet? 6
What are the components of stockholders’ equity section? 6
How is US GAAP different from other countries? 6
Income Statement 8
What is the difference between cash and accrual accounting? 8
When do I record revenues under accrual accounting? 8
When I record revenue should I record other things as well? 8
When do I record expenses under accrual accounting? 8
When do I record asset impairment charges under accrual accounting? 9
When do I record restructuring charges under accrual accounting? 10
Statement of cash flows 12
What is the purpose of this statement? 12
What is the format of the statement? 12
What sections does it contain? Where do certain items go on the statement? 12
Structure of cash flow statement 12
How does US GAAP differ from other GAAP? 13
How do I reconcile net income to operating cash flows? What is the intuition behind each adjustment? 13
Analyze companies based on their statement of cash flows 14
Ambiguities in Classifying Cash Flows 16
Revenue Recognition 18
Revenue & Expenses vs. Gains & Losses 18
Earned / Realized or Realizable? 18
Revenue recognition at time of sale 18
Income recognition at times different from sale 19
If I record the revenues, should I record other items as well? 19
“Profits you can trust”, chapter 3 – Revenue recognition 19
Inventory Accounting 21
What is inventory? And basic definitions. 21
What are the various methods of inventory accounting? 21
What is the difference between periodic and perpetual inventory systems? 21
Be able to explain LIFO and FIFO? 21
What is the LIFO conformity rule and how does this differ from depreciation methods? 22
What is the LIFO reserve? 23
What does it mean to liquidate LIFO layers? What will be the impact on the financial statements? Why? Explain, “holding gains”. 23
How do we adjust financials of two companies that might be on different methods? 23
What is the impact of LIFO versus FIFO on cash? Revenues? COGS? 24
What happens if prices are decreasing? 24
Depreciation Accounting 25
What are the different methods of accounting? 25
Why do companies pick one over the other? What is the relationship of depreciation methods to taxes? 25
How is depreciation calculated? 25
What is straight line? 25
What is an accelerated method? What are some examples? 25
What is the units of production method? 26
How does the company decide on useful life? Is it the same as physical life? Could it be? 26
What is residual value? What is salvage value? Could the salvage value be negative? Explain. 26
What happens when a company changes its depreciation estimates? 26
What happened when a company changes its depreciation methods? 27
Contingent Liabilities 28
What are liabilities? 28
What are contingent liabilities? 28
When do you record a contingent liability on the balance sheet? 28
When do you record a contingent liability in the financial footnotes? 28
What are the most common examples of contingent liabilities? 29
Other liabilities on the company’s books 29
Capital leases versus operating leases 30
What is a capital lease? 30
What is an operating lease? 30
When do we record one versus the other? 30
What is the impact on the company’s financials of recording a lease? Balance sheet? Income Statement? Cash Flow Statement? 31
How can we compare companies that have a lot of operating leases to those that have a lot of capital leases? 31
Why does a company lease instead of buy? 32
Rule based versus principles based accounting treatments? 32
Stockholders’ Equity 33
What is c/s and APIC? What is par value? 33
What is Retained Earnings? What is Accumulated Deficit? 33
What is Treasury Stock? How does the purchase and resale of treasury stock get recorded? On the B/S? On the Income Statement? On the Statement of Cash flows? 33
Why do companies repurchase their shares? 34
What is “Other Comprehensive Income”? 34
What is preferred stock? 35
How does dividend get recorded? 35
What is a cumulative preferred stock? What is a convertible preferred stock? 35
What is a convertible debt security? How does it get recorded on the financials? 35
Acquiring marketable securities and companies (M&A accounting) 37
What are the cost method, equity method, and consolidation? 37
How do you treat dividends received in the equity method? 40
What is minority interest? Where does it show up on the company’s financials? 40
What is the treatment for M&A transactions? 41
What is goodwill? How is it treated in the US and outside of the US? 41
Effect of accounting transactions on the statement of cash flows 42
Ratio Analysis 45
What are ratios? What should you understand about ratios? 45
What are the major ratios? 45
What is the DuPont equation? What information does it provide? 45
What are common size income statements and common size balance sheets? 45
How do you identify industries based on the ratios? 45



Financial Statement Basics