PART III: AREA II – SELECT BALANCE SHEET ACCOUNTS

In this section

• Chapter 9: Cash and Cash Equivalents
  • Definitions, Classifications, Petty Cash
    Learn the fundamentals of cash and cash equivalents classification, petty cash best practices, and borderline cases such as money market funds and short-term investments.
  • Bank Reconciliations, Proof of Cash
    A thorough examination of bank reconciliations, featuring step-by-step instructions, definitions of key terms, common pitfalls, and best practices to ensure accurate cash reporting. This guide also introduces the proof of cash method for enhanced internal controls and fraud detection.
  • Cash Controls, Cash-Related Disclosures
    Learn essential safeguards for cash management through robust internal controls, lockbox arrangements, segregation of duties, and disclosures for transparency in financial statements.
• Chapter 10: Trade Receivables
  • Recognition, Allowances for Uncollectible Accounts
    Explore the direct write-off vs. allowance methods for accounts receivable, learn how to estimate bad debts, and understand the interplay with revenue recognition.
  • Factoring, Assigning, and Pledging Receivables
    Explore the complexities of factoring receivables with and without recourse, highlight risk retention, and understand how assignment or pledging impacts balance sheet classification and financial disclosures.
  • Presentation and Disclosure Requirements
    Learn how to present net trade receivables on the balance sheet and prepare critical disclosures involving credit risk, allowance for doubtful accounts, and the nature of receivables.
• Chapter 11: Inventory
  • Periodic vs. Perpetual Systems (Costing and Record-Keeping)
    Discover the key differences between periodic and perpetual inventory systems, including journal entries, impacts on COGS, and best practices for effective inventory management.
  • Costing Methods (FIFO, LIFO, Weighted-Average, Specific ID)
    Master Inventory Costing Methods for accurate financial statements: explore FIFO, LIFO, Weighted-Average, and Specific Identification.
  • Lower of Cost or Net Realizable Value / Lower of Cost or Market
    Master the essentials of applying lower of cost or net realizable value (LCNRV) and lower of cost or market (LCM) for inventory under both U.S. GAAP and IFRS. Learn key concepts, real-world examples, and critical differences to excel on the FAR CPA Exam.
  • Retail Inventory Method, Gross Profit Method
    In-depth coverage of the Retail Inventory Method and the Gross Profit Method, featuring step-by-step calculations, real-world examples, and best practices for estimating inventory balances.
  • Inventory Errors and Adjustments
    Learn how to identify, correct, and prevent inventory misstatements using a 2-year approach and best-in-class accounting methodologies.
• Chapter 12: Property, Plant, and Equipment
  • Acquisition and Capitalization (Self-Constructed Assets)
    Explore direct vs. indirect costs, interest capitalization, and the distinction between repairs and capital improvements for property, plant, and equipment assets.
  • Depreciation Methods (SL, DDB, Sum-of-the-Years’-Digits), Depletion
    A comprehensive guide exploring Straight-Line, Double-Declining Balance, and Sum-of-the-Years’-Digits depreciation methods, plus depletion for natural resources. Includes formulas, partial-year examples, practical illustrations, visual diagrams, and best practices.
  • Subsequent Expenditures (Repairs, Betterments, Replacements)
    Learn the key principles and best practices surrounding capitalizing or expensing subsequent expenditures on Property, Plant, and Equipment assets, including major repairs, betterments, and replacements.
  • Impairment Testing and Asset Retirement Obligations
    Detailed guidance on the two-step and one-step impairment test frameworks under U.S. GAAP, accompanied by an in-depth look at measuring and recording ARO liabilities.
  • Assets Held for Sale and Disposal
    Comprehensive guidance on the classification, measurement, and cessation of depreciation for long-lived assets held for sale or disposal under U.S. GAAP and IFRS.
• Chapter 13: Investments
  • Classification (Trading, AFS, HTM, Fair Value)
    Explore how management’s intent drives the classification of investment assets into Trading, Available-for-Sale, Held-to-Maturity, and Fair Value categories, including the treatment of unrealized gains and losses under U.S. GAAP.
  • Equity Investments (Including Equity Method)
    Explore fair value through net income vs. equity method, significant influence thresholds, and best practices in accounting for equity investments.
  • Impairment Recognition for Debt and Equity Securities
    Explore the comprehensive approaches under ASC 326 for debt securities and impairment considerations for equity securities, including credit loss models, IFRS comparisons, best practices, and illustrative examples.
  • Disclosure Requirements for Investments
    Explore fair value hierarchy, realized vs. unrealized gains, concentration risks, and reclassification adjustments for investment disclosures under GAAP, including illustrative footnotes and best practices.
• Chapter 14: Intangible Assets
  • Finite-Lived vs. Indefinite-Lived Intangibles (Amortization, Impairment)
    Explore the distinctions between finite-lived and indefinite-lived intangible assets, covering key accounting treatments including amortization and impairment testing, with practical examples and best practices.
  • Goodwill Recognition and Impairment Testing
    Explore goodwill recognition in business combinations under U.S. GAAP and IFRS, learn the qualitative vs. quantitative impairment testing methodologies, and understand key differences between the two frameworks.
  • Internal-Use Software (Capitalization, Amortization Rules)
    Explore comprehensive guidelines for internal-use software accounting, covering the three critical stages—preliminary project stage, application development, and post-implementation. Learn when to capitalize costs, when to expense them, and how to handle subsequent amortization. Includes practical illustrations, best practices, pitfalls, and a quiz.
• Chapter 15: Payables and Accrued Liabilities
  • Accounts Payable, Accrued Liabilities, Estimated Liabilities
    A comprehensive guide to identifying, measuring, and accounting for short-term obligations such as accounts payable, accrued liabilities (including wages, utilities, and other operating expenses), and estimated liabilities under U.S. GAAP.
  • Asset Retirement Obligations (ARO), Exit or Disposal Obligations
    Comprehensive coverage of Asset Retirement Obligations (ARO) and exit or disposal obligations, focusing on initial recognition, discount rates, remeasurement triggers, and real-world applications.
  • Classification and Presentation Considerations
    Discover the key principles and best practices for classifying short-term vs. long-term obligations, including refinancing considerations, interest rate disclosures, and maturity schedules.
• Chapter 16: Debt (Financial Liabilities)
  • Notes Payable, Bonds Payable, Debt Issuance Costs
    Explore the intricacies of notes payable, bonds payable, and debt issuance costs under U.S. GAAP—covering net vs. separate presentation, premium/discount amortization methods, and practical examples.
  • Recognition, Measurement (Discounts/Premiums), Amortization Methods
    Discover how to recognize, measure, and account for bonds issued at discounts or premiums, and master key amortization methods for effective debt management and CPA exam success.
  • Covenants, Troubled Debt Restructurings, Debt Modifications
    Explore debt covenants, TDR accounting, and debt modifications vs. extinguishments. Learn how to comply with financial covenants and disclose TDRs in line with U.S. GAAP requirements.
• Chapter 17: Equity
  • Stock Issuance, Treasury Stock Transactions
    Comprehensive coverage of par vs. no-par stock, repurchase methods (cost and par value), and the impact of treasury stock transactions on equity balances.
  • Dividends (Cash, Property, Liquidating), Stock Dividends, Splits
    Learn the intricacies of accounting for dividends, including cash, property, and liquidating dividends, and understand the nuances of small vs. large stock dividends and stock splits.
  • Equity Presentation and Key Disclosures
    Explore comprehensive guidance on presenting shareholders’ equity, capital structure, dividends, and disclosure requirements. Learn how to effectively prepare the statement of changes in equity, address share-based considerations, and navigate both U.S. GAAP and IFRS implications for transparent and robust financial reporting.
  • Pushdown Accounting and Quasi Reorganizations (Advanced Concepts)
    Explore the advanced concepts of pushdown accounting and quasi reorganizations, focusing on the revaluation of assets and liabilities upon a pushdown event and the rarely used, yet crucial, quasi reorganization rules.