About Me
CPA
1 Regulation (REG)
1.1 Ethics, Professional Responsibilities, and Federal Tax Procedures
1.1 1 Professional ethics and responsibilities
1.1 2 Federal tax procedures and practices
1.1 3 Circular 230
1.2 Business Law
1.2 1 Legal rights, duties, and liabilities of entities
1.2 2 Contracts and sales
1.2 3 Property and bailments
1.2 4 Agency and employment
1.2 5 Business organizations
1.2 6 Bankruptcy
1.2 7 Secured transactions
1.3 Federal Taxation of Property Transactions
1.3 1 Basis determination and adjustments
1.3 2 Gains and losses from property transactions
1.3 3 Like-kind exchanges
1.3 4 Depreciation, amortization, and depletion
1.3 5 Installment sales
1.3 6 Capital gains and losses
1.3 7 Nontaxable exchanges
1.4 Federal Taxation of Individuals
1.4 1 Gross income inclusions and exclusions
1.4 2 Adjustments to income
1.4 3 Itemized deductions and standard deduction
1.4 4 Personal and dependency exemptions
1.4 5 Tax credits
1.4 6 Taxation of individuals with multiple jobs
1.4 7 Taxation of nonresident aliens
1.4 8 Alternative minimum tax
1.5 Federal Taxation of Entities
1.5 1 Taxation of C corporations
1.5 2 Taxation of S corporations
1.5 3 Taxation of partnerships
1.5 4 Taxation of trusts and estates
1.5 5 Taxation of international transactions
2 Financial Accounting and Reporting (FAR)
2.1 Conceptual Framework, Standard-Setting, and Financial Reporting
2.1 1 Financial reporting framework
2.1 2 Financial statement elements
2.1 3 Financial statement presentation
2.1 4 Accounting standards and standard-setting
2.2 Select Financial Statement Accounts
2.2 1 Revenue recognition
2.2 2 Inventory
2.2 3 Property, plant, and equipment
2.2 4 Intangible assets
2.2 5 Liabilities
2.2 6 Equity
2.2 7 Compensation and benefits
2.3 Specific Transactions, Events, and Disclosures
2.3 1 Leases
2.3 2 Income taxes
2.3 3 Pensions and other post-retirement benefits
2.3 4 Derivatives and hedging
2.3 5 Business combinations and consolidations
2.3 6 Foreign currency transactions and translations
2.3 7 Interim financial reporting
2.4 Governmental Accounting and Not-for-Profit Accounting
2.4 1 Governmental accounting principles
2.4 2 Governmental financial statements
2.4 3 Not-for-profit accounting principles
2.4 4 Not-for-profit financial statements
3 Auditing and Attestation (AUD)
3.1 Engagement Planning and Risk Assessment
3.1 1 Engagement acceptance and continuance
3.1 2 Understanding the entity and its environment
3.1 3 Risk assessment procedures
3.1 4 Internal control
3.2 Performing Audit Procedures and Evaluating Evidence
3.2 1 Audit evidence
3.2 2 Audit procedures
3.2 3 Analytical procedures
3.2 4 Substantive tests of transactions
3.2 5 Tests of details of balances
3.3 Reporting on Financial Statements
3.3 1 Audit report content
3.3 2 Types of audit reports
3.3 3 Other information in documents containing audited financial statements
3.4 Other Attestation and Assurance Engagements
3.4 1 Types of attestation engagements
3.4 2 Standards for attestation engagements
3.4 3 Reporting on attestation engagements
4 Business Environment and Concepts (BEC)
4.1 Corporate Governance
4.1 1 Internal controls and risk assessment
4.1 2 Code of conduct and ethics
4.1 3 Corporate governance frameworks
4.2 Economic Concepts
4.2 1 Microeconomics
4.2 2 Macroeconomics
4.2 3 Financial risk management
4.3 Financial Management
4.3 1 Capital budgeting
4.3 2 Cost measurement and allocation
4.3 3 Working capital management
4.3 4 Financial statement analysis
4.4 Information Technology
4.4 1 IT controls and security
4.4 2 Data analytics
4.4 3 Enterprise resource planning (ERP) systems
4.5 Operations Management
4.5 1 Strategic planning
4.5 2 Project management
4.5 3 Quality management
4.5 4 Supply chain management
2 2 Select Financial Statement Accounts Explained

2 Select Financial Statement Accounts Explained

Key Concepts

Assets

Assets are resources owned or controlled by a company that are expected to provide future economic benefits. They are typically classified as current (short-term) or non-current (long-term) based on their liquidity.

Example: Cash, accounts receivable, inventory, and property, plant, and equipment (PP&E) are all examples of assets. Cash is a current asset, while PP&E is a non-current asset.

Liabilities

Liabilities are obligations that a company owes to external parties. They represent the claims of creditors against the company's assets. Liabilities are also classified as current or non-current based on their due dates.

Example: Accounts payable, notes payable, and long-term debt are all examples of liabilities. Accounts payable is a current liability, while long-term debt is a non-current liability.

Equity

Equity represents the residual interest in the assets of the company after deducting liabilities. It includes the contributions made by shareholders and the retained earnings of the company.

Example: Common stock, retained earnings, and treasury stock are all components of equity. Common stock represents the initial investment by shareholders, while retained earnings represent the accumulated profits of the company.

Revenue

Revenue is the income earned by a company from its normal business operations. It is recognized when it is earned and realizable, typically when goods are delivered or services are rendered.

Example: Sales revenue from the sale of products or services, interest income from loans, and rental income from property are all examples of revenue.

Expenses

Expenses are the costs incurred in the process of generating revenue. They are recognized in the period in which they are incurred, following the matching principle.

Example: Cost of goods sold, salaries, rent, and depreciation are all examples of expenses. Cost of goods sold is directly related to sales revenue, while salaries and rent are operating expenses.

Examples and Analogies

Consider assets as "tools" that a company uses to generate revenue. Current assets are like "hand tools" that are used up quickly, while non-current assets are like "heavy machinery" that provide long-term benefits.

Liabilities can be thought of as "debts" that the company owes to others. Current liabilities are like "short-term loans" that need to be repaid soon, while non-current liabilities are like "mortgages" that are paid off over a longer period.

Equity is like the "ownership stake" in the company. It represents the shareholders' claim on the company's assets after all liabilities are paid off.

Revenue is the "income" that a company earns from its business activities. It is the reward for the company's efforts and resources.

Expenses are the "costs" associated with generating that income. They are the necessary investments that the company makes to keep the business running.

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