Financial Accounting

1.Financial Reporting Environment

  • Define the purpose of financial reporting and identify the primary financial statements.
  • Explain why we need accounting standards.
  • Identify major policy setting bodies and their role in the standard setting process.
  • Define Generally Accepted Accounting Principles (GAAP) and explain how they are determined.
  • Assess the importance of ethics in Accounting.

2.Financial statements and related disclosures

  1. Define the following financial statements, their purpose, format, limitations and disclosure requirements?
    • Income Statement
    • Balance Sheet
    • Statement of Changes in Equity
    • Statement of Cash flows [Direct and Indirect method]

3.Cash and Receivables

  • Identify items of Cash and Cash Equivalents.
  • Understand the importance of cash management.
  • Understand the credit policies and internal controls related to receivables.
  • Explain accounting issues related to recognition, valuation and disposition of receivables.

 

4.Inventories

  • Define inventory and explain the advantages and disadvantages of periodic and perpetual inventory system.
  • Understand Inventory valuation methods: Specific identification, Average Cost, FIFO and LIFO
  • Describe the significance of the LIFO reverse.
  • Demonstrate understanding of choosing inventory valuation method and its impact on financial statements.
  • Describe and apply the Lower-of-cost-or-market rule.
  • Use of Gross Profit method to estimate ending inventory.
  • Determine the impact of inventory recording errors on financial statement.

 

5.Noncurrent Assets

  • Identify noncurrent assets: (1) property, plant and equipment, (2) intangible assets, (3) natural resources.
  • Explain how to account for acquisition of noncurrent assets.
  • Describe the procedures for depreciation, depletion and amortization.
  • Explain the accounting issues associated with impairments, assets write-downs and disposals.

 

6.Debt and Equity Financing

  • Understand the short-term debt obligations and the purpose of the line of credit.
  • Apply present value concepts to the long-term debts.
  • Understand various types of bonds, compute the price of bonds and account for bond issuance, interest, redemption of bonds, bond discounts and bound premiums.
  • Discuss the fair value option for financial assets and liabilities.
  • Record the issuance of stock for cash and noncash assets.
  • Deal with accounting issues of stock rights, stock warrants, stock options, stock dividend, stock splits, cash dividend, property dividend and stock repurchase.

 

7.Investment in Debt and Equity securities

  1. Understanding various classifications associated with investment securities.
  2. Account for recognition of revenue from, sale of and change in fair value of investment securities.
  3. Understand the difference between simple and complex capital structure.
  4. Understand how dilutive securities affect earnings per share.
  5. Compute earnings per share in simple and complex capital structure.

 

8.Leases

  • Demonstrate an understanding of the accounting issues faced by the lessor and the lessee in recording a lease transaction.
  • Account for capital and operating lease for the lessor and the lessee.

 

9.Business Combination and Consolidation of Financial Statements

  • Define Business combination and differentiate various forms of it.
  • Determine the fair value of consideration transferred for an acquisition.
  • Describe the two criteria for recognizing intangible assets in a business combination.
  • Prepare consolidated financial statements subsequent to the date of acquisition.
  • Demonstrate an understanding how to allocate goodwill acquired and consolidated net income in a business combination between controlling and noncontrolling interests.

 

10.Foreign currency transactions and hedging foreign exchange risk

  • Demonstrate an understanding of concepts related to foreign currency, exchange rates and foreign currency exchange risks.
  • Demonstrate and apply knowledge of foreign currency forward contracts and options to hedge foreign exchange risk.
  • Demonstrate and apply knowledge of forward contracts and options to hedge foreign currency firm commitments.
  • Demonstrate and apply knowledge of forwarded contracts and options to hedge forecasted foreign currency transactions.

 

11.Partnership

  • Define Partnership and its advantages and disadvantages.
  • Demonstrate an understanding how to record partner’s capital investment using Bonus method and Goodwill method.
  • Understand accounting issues involved in dissolution of a partnership.
  • Understand accounting issues involved in withdrawal of a current partner.
  • Understand accounting issues involved in termination and liquidation of a partnership

 

11.Accounting for State and Local Government

  • Define the purpose of financial reporting and identify the primary financial statements.
  • Explain why we need accounting standards.
  • Identify major policy setting bodies and their role in the standard setting process.

 

 

Recommended readings

 

  1. Intermediate Accounting by Kieso, Weygandt and Warfield
  2. Advanced Accounting by Hoyle, Schaefer and Doupnik