Financial Accounting Self Study
A comprehensive course covering the basics of financial accounting and construction of financial statements
Course Description
The purpose of this self-study program in financial accounting is to introduce the basic concepts and logic underlying the reporting of financial information. Understanding the logic behind the preparation of financial statements is crucial in interpreting the information reported, and provides a framework for analysis.
This study is broken down into six units. In each unit, the approach is to:
- develop the logic behind a particular point (or subject)
- illustrate the logic through an example (or examples)
- give exercises that require you to demonstrate your understanding of the material
- summarize the major points
- at the end of each unit are a series of problems for you to work
The exercises contained within each unit are straightforward and parallel the concepts developed in the text. If you choose to print the unit space is provided within the study (after each exercise) for your answers. Work all exercises and check your answers against the answers provided. Even if you arrive at the correct answer, review the suggested solution since it provides a step-by-step approach to problem solving. It may also provide a better understanding of the material.
The practice problems at the end of each unit are generally more difficult than the exercises. They require you to apply the concepts developed in each unit in a manner similar to that which you’ll use in analysis. In preparing your solutions to these problems, use your own paper (you do not need to use standard accounting paper). Keep your answers for review.
Unlike some self-studies, this is not an easy program to complete. It is not a superficial treatment of accounting but a detailed study that develops a logic. It requires a considerable effort on your part. You cannot memorize and expect to understand the material — you must think through the logic.
Don’t skip any part of this study — one part builds on another. You’ll notice that there is considerable repetition. This is done on purpose. Since you will be completing this program outside a classroom environment without an opportunity to ask questions, repetition is the only means to ensure that you understand the major points.
This study is based on years of experience in teaching accounting courses in finance and credit training programs. We want to accomplish certain objectives: To develop an understanding of the fundamentals used in analysis, and to provide a sound basis for more advanced study of specific areas of accounting that are of concern in financial and credit analysis. We would appreciate it if you would note any areas in this study that are not clear, or any other suggestions you might have for improving the study. Have fun.
Dale Broderick
Dale G. Broderick holds a CPA, an MBA in accounting from the University of Chicago, and a Ph.D. in business economics from Columbia University. Dr. Broderick spent four years in public accounting with Price Waterhouse & Co., and five years as Secretary-Treasurer and Director of Ter Bush & Powell, a financial organization in New York. After seven years as a tenured Associate Professor at the Whittemore School of Business and Economics of the University of New Hampshire, Dr. Broderick assumed a position as an Adjunct Associate Professor involved in the Executive MBA Program. He also taught in the Columbia Graduate School of Business as an Adjunct Associate Professor. For the past forty years, Dr. Broderick has been involved in the development and teaching of credit and risk analysis training programs for financial institutions in the U.S. and internationally. He resides in Cary, North Carolina.
Course curriculum
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2
Unit 1 Basic Accounting Concepts
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Introduction
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Section 1: Relationship Between Resources and Income
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Exercise 1 - 1
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Solution: Exercise 1 - 1
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Resources, Claims Against Resources, and Income
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Exercise 1 - 2
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Solution: Exercise 1 - 2
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Section 2: Basic Elements of Accounting
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Exercise 1 - 3
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Solution: Exercise 1 - 3
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What are Liabilities?
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Exercise 1 - 4
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Solution: Exercise 1 - 4
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What is Equity?
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Example: Income, Investments, and Distributions of Profits
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Exercise 1 - 5
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Solution: Exercise 1 - 5
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Exercise 1 - 6
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Solution: Exercise 1 - 6
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Section 3: The Accounting Process
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Exercise 1 - 7
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Solution: Exercise 1 - 7
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Financial Statements
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Illustration of Accounting Process
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Making Adjustments
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Preparing Financial Statements
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Exercise 1 - 8
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Solution: Exercise 1 - 8
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Summary of Major Points
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Problem 1 - 1
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Solution: Problem 1 - 1
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Problem 1 - 2
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Solution: Problem 1 - 2
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Problem 1 - 3
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Solution: Problem 1 - 3
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Problem 1 - 4
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Solution: Problem 1 - 4
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Problem 1 - 5
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Solution: Problem 1 - 5
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Problem 1 - 6
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Solution: Problem 1 - 6
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Problem 1 - 7
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Solution: Problem 1 - 7
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3
Unit 2 Accounting Procedures
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Introduction
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Section 1: The Accounting Framework
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Section 2: Recording Procedures
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Exercise 2 - 1
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Solution: Exercise 2 - 1
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Debits and Credits
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Examples: T- Accounts, Debits, and Credits
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Exercise 2 - 2
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Solution: Exercise 2 - 2
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Recording Accounting Events
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Exercise 2 - 3
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Solution: Exercise 2 - 3
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Posting Journal Entries
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Exercise 2 - 4
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Solution: Exercise 2 - 4
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Preparing Trial Balances
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Illustration of Recording Procedures - Recording Transactions
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Illustration of Recording Procedures - Making Adjustments
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Section 3: Preparing Financial Statements
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Exercise 2 - 5
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Solution: Exercise 2 - 5
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Summary of Major Points
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Problem 2 - 1
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Solution: Problem 2 - 1
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Problem 2 - 2
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Solution: Problem 2 - 2
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Problem 2 - 3
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Solution: Problem 2 - 3
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Problem 2 - 4
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Solution: Problem 2 - 4
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Problem 2 - 5
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Solution: Problem 2 - 5
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4
Unit 3 Accounting for Costs
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Introduction
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Section 1: The Relationship Between Cost and Expense
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Exercise 3 - 1
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Solution: Exercise 3 - 1
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Section 2: Accounting for Costs of Supporting Activities
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Exercise 3 - 2
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Solution: Exercise 3 - 2
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Exercise 3 - 3
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Solution: Exercise 3 - 3
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Exercise 3 - 4
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Solution: Exercise 3 - 4
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Exercise 3 - 5
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Solution: Exercise 3 - 5
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Accounting for Prepaid Expenses
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Exercise 3 - 6
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Solution: Exercise 3 - 6
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Exercise 3 - 7
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Solution: Exercise 3 - 7
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Accounting for Fixed Assets
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Example: Accounting for Fixed Assets
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Exercise 3 - 8
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Solution: Exercise 3 - 8
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Exercise 3 - 9
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Solution: Exercise 3 - 9
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Exercise 3 - 10
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Solution: Exercise 3 - 10
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Section 3: Accounting for Inventory
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Exercise 3 - 11
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Solution: Exercise 3 - 11
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Adjustments to Inventory
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Exercise 3 - 12
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Solution: Exercise 3 - 12
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Exercise 3 - 13
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Solution: Exercise 3 - 13
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Summary of Major Points
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Problem 3 - 1
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Solution: Problem 3 - 1
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Problem 3 - 2
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Solution: Problem 3 -2
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Problem 3 - 3
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Solution: Problem 3 - 3
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Problem 3 - 4
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Solution: Problem 3 - 4
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Problem 3 - 5
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Solution: Problem 3 - 5
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5
Unit 4 Accounting for Revenue
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Introduction
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Section 1: Revenue Recognition
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Exercise 4 - 1
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Solution: Exercise 4 - 1
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Section 2: Accounting for Cash Transactions and Receipts-in-Advance
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Exercise 4 - 2
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Solution: Exercise 4 - 2
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Example: Receipts-in-Advance
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Exercise 4 - 3
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Solution: Exercise 4 - 3
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Exercise 4 - 4
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Solution: Exercise 4 - 4
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Section 3: Revenue Recognized Prior to Receipt of Cash
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Exercise 4 - 5
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Solution: Exercise 4 - 5
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Accrual of Revenue
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Exercise 4 - 6
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Solution: Exercise 4 - 6
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Accounting for Adjustments to Revenue
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Exercise 4 - 7
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Solution: Exercise 4 - 7
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Exercise 4 - 8
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Solution: Exercise 4 - 8
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Uncollectible Accounts
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Example: Uncollectible Accounts
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Exercise 4 - 9
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Solution: Exercise 4 - 9
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Exercise 4 - 10
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Solution: Exercise 4 - 10
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Exercise 4 - 11
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Solution: Exercise 4 - 11
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Summary of Major Points
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Problem 4 - 1
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Solution: Problem 4 - 1
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Problem 4 - 2
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Solution: Problem 4 - 2
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Problem 4 - 3
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Solution: Problem 4 - 3
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Problem 4 - 4
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Solution: Problem 4 - 4
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Problem 4 - 5
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Solution: Problem 4 - 5
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6
Unit 5 Summary of the Accounting Process
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Introduction
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Section 1: Logic Underlying Accounting Process
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Exercise 5 - 1
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Solution: Exercise 5 - 1
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Measurement of Events and Related Elements
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Exercise 5 - 2
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Solution: Exercise 5 - 2
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Accounting Principles
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Section 2: The Accounting Cycle
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Section 3: Auditor's Report
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Exercise 5 - 3
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Solution: Exercise 5 - 3
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Summary of Major Points
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Problem 5 - 1
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Solution: Problem 5 - 1
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Problem 5 - 2
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Solution: Problem 5 - 2
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Problem 5 - 3
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Solution: Problem 5 - 3
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7
Unit 6 Cash Flow Statements
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Introduction
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Section 1: Background to Cash Flow
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Exercise 6 - 1
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Solution: Exercise 6 - 1
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Exercise 6 - 2
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Solution: Exercise 6 - 2
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Exercise 6 - 3
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Solution: Exercise 6 - 3
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Section 2: The Cash Flow Statement
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Preparing the Cash Flow Statement - Operating Cash Flows: The Direct Method
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Preparing the Cash Flow Statement - Operating Cash Flows: The Indirect Method
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Cash from Investing and Financing Activities
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The Cash Flow Statement
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Exercise 6 - 4
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Solution: Exercise 6 - 4
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A Return Visit to Some Important Points
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Problem 6 - 1
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Solution: Problem 6 - 1
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Problem 6 - 2
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Solution: Problem 6 - 2
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Problem 6 - 3
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Solution: Problem 6 - 3
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Problem 6 - 4
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Solution: Problem 6 - 4
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Problem 6 - 5
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Solution: Problem 6 - 5
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