Financial Accounting Summary

Topics: Depreciation, Generally Accepted Accounting Principles, Asset Pages: 47 (13815 words) Published: November 7, 2008
Financial Accounting Summary
Financial Accounting – Summary Notes
Financial Accounting – Summary Notes1
Financial Statement Basics3
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 sheet6

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 Statement8
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 flows12
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 statement12
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 flows14
Ambiguities in Classifying Cash Flows16
Revenue Recognition18
Revenue & Expenses vs. Gains & Losses18
Earned / Realized or Realizable?18
Revenue recognition at time of sale18
Income recognition at times different from sale19
If I record the revenues, should I record other items as well?19 “Profits you can trust”, chapter 3 – Revenue recognition19 Inventory Accounting21
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 Accounting25
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 Liabilities28

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 books29

Capital leases versus operating leases30
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...
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