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Including well over 100 hours of content, e-book (EPUB, MOBI, PDF) ,Excel worksheet, & PDF files, this is comprehensive
What you’ll learn
An Introduction to Accounting, The Double Entry Accounting System, & Recording Transactions using Debits and Credits
Analyze, use, and create from scratch financial statements including a balance sheet, income statement, statement of equity, and statement of cash flows
Use the concepts of the double entry accounting system
Record financial transactions using the accounting equation
Record financial transactions using debits and credits
Learn when and how to use accounting methods such a the accrual method and cash method
Apply the concepts related to the revenue recognition principle and the matching principle to recording transactions and reading financial statements
Record period end adjusting entries and be able to explain why adjusting entries are necessary is a well designed accounting system
Record merchandising transactions. Record transactions involving inventory
Track inventory using cost flow methods like FIFO, LIFO, and Weighted Average Methods
Recently updated with A LOT of added content.
Includes downloadable e-book in multiple formats so you can open it on your tablet or Kindle – Formats (EPUB, MOBI, PDF).
This course is an excellent supplement for students or anybody who wants to learn accounting and also have something they can refer back to in the future. Udemy generally provides lifetime access to the course.
Many accounting students do not receive a physical book, they get to keep from their school, and even if they did, the information could become dated. Students who want a useful reference tool they can keep, and one that can be more easily updated then a textbook, will benefit from a resource such as this.
Financial accounting is a LARGE topic and is not something that can be done well in 5, 10, or 20, hours of content, as you may see claimed elsewhere. We will cover accounting theory because theory and concepts are what accounting is. We need to learn theory so we can make appropriate adjustments in the real world. Learning procedures without understanding the theory will make us inflexible and unable to adapt to the ever-changing environment. We will learn the theory while we apply them to procedures.
Financial accounting is relatively standardized in format. In other words, most accounting institutions will cover much the same topics, often in much the same order. We suggest looking up a standard accounting textbook, checking the index, and comparing the topics to the courses you are considering purchasing. We believe this course will line up well to anybody’s needs who want to learn financial accounting.
Below is a list of topics by section:
Section SEC 1 An Introduction to Accounting, The Double Entry Accounting System, & Recording Transactions using Debits and Credits
Section SEC 2 – Recording Period End Adjusting Entries
Section SEC 3 – Recording Closing Entries
Section SEC 4 – Merchandising Transactions – Transactions Involving Inventory
Section SEC 5 – Inventory Cost Flow Assumptions (FIFO, LIFO, Weighted Average Methods)
Section SEC 6 – Subsidiary Ledgers & Special Journals
Section SEC 7 – Bank Reconciliations & Cash Internal Controls
Section SEC 8 – Accounts Receivable – Allowance Method & Direct Write Off Methods
Section SEC 9 – Depreciation Methods & Property Plant & Equipment
Section SEC 10 – Payroll Accounting
Section SEC 11 – Partnership Accounting
Section SEC 12 – Accounting for Corporations
Section SEC 13 – Bonds Payable, Notes Payable, & Long-Term Liabilities
Section SEC 14 – Statement of Cash Flows
The course will start off at the basics and work all the way through the financial accounting topics generally covered in an undergraduate program.
First, we will describe what financial accounting is and the objectives of financial accounting. We will learn how the double-entry accounting system works by applying it to the accounting equation. In other words, we will use an accounting equation to record financial transactions using a double-entry accounting system.
We well learn all topics by fist having presentations and then applying the skills using Excel practice problems. If you are not familiar with how to navigate through Excel, it is OK. We will use preformatted worksheets, have step by step instructional videos, and will start off relatively slow.
The next step is to apply the double-entry accounting system using debits and credits. Debits and credits are a new concept to most people not familiar with accounting, or possibly worse, many people have misconceptions about the meaning of debit and credit due to its use in areas like bank statements, credit cards, and debit cards.
We will cover the rules related to debits and credits in a lot of detail. We will then record similar transactions we had done using the accounting equation, but now using debits and credits.
After we get good at recording transactions using debits and credits, we will learn period end adjusting entries. Adjusting entries are used to adjust the books to represent an accrual basis at the period end better, and they are a great tool for enforcing the concepts of accrual accounting.
Next, we will use the data we have learned to put together by recording financial transactions into financial statements, including the balance sheet, income statement, and statement of equity. We will learn to construct a statement of cash flows much later in the course.
After completing the financial statements, we will learn how to journalize and post-closing entries. Closing entries are used to clean out temporary accounts and prepare for the transactions that will be recorded in the next period.
The steps we have just outlined are critically important to all accounting, and we will need a reasonably good understanding of them to move forward. In other words, the better we understand these concepts, the more natural learning the rest of financial accounting will be. We recommend spending a good deal of time on these concepts and reviewing them often. Think of these skills as a baseball player thinks of playing catch or a musician thinks of playing the basic scales. We should put in some practice with the basics every day.
Next, we will add inventory to the mix. All the skills we have learned will still apply, but we will now record transactions related to the purchase and sale of inventory.
We will also learn to track inventory using different methods. We can use specific identification. In other words, we can track the exact unit of inventory that was sold as a car dealership would do. However, companies generally use a cost flow assumption with smaller items that are the same in nature, assumptions like First In Fist Out (FIFO) or Last In Last Out (LIFO). A company may also use a weighted average method.
Next well will consider subsidiary ledger and special journals. Our main focus is on subsidiary ledger related to accounts receivable and accounts payable. Accounts receivable represents money owed to the organization.
The general ledger will provide the transactions that make up the accounts receivable account balance by date. However, we will want to see this data reported by customers, so we know who owes the company money and how much, and this is the accounts receivable subsidiary ledger.
We have a similar situation with accounts payable. Accounts payable represent vendors the company owes money to. We will want to sort this information by vendors, so we know which vendors we owe money to and how much.
Next, we will cover bank reconciliation and internal controls related to cash. The bank reconciliation is one of the most important internal controls outside of the double-entry accounting system itself. All businesses, large and small, should perform a bank reconciliation. The bank reconciliation will reconcile the cash balance on the company’s books to the cash balance reported by the bank as of a specific date, the date of the bank statement, typically the end of the month.
The bank statement balance will not agree to the book balance due to outstanding items, items recorded by the company, but which have not yet cleared the bank. The outstanding items will be the reconciling items in a bank reconciliation.
Next will learn how to value accounts receivable and deal with those accounts we will not be able to collect on. In other words, accounts receivable represent money owed to the business for work done in the past. However, some of those receivables may not ever be paid. How do we account for the a customers we do not think will pay and how do we value the accounts receivable account if we believe some of the receivable will may not be collected in the future, but we do not know which ones?
GAAP generally requires the use of what is called the allowance method to value accounts receivable. We will compare the allowance method to the direct write off method, an easier method but one that does not conform to accrual accounting as well.
Next, we will cover property plant and equipment. The most difficult concept related to property plant and equipment is calculating and recording depreciation. Deprecation can be calculated using different methods, including the straight-line method, the double-declining balance method, and the units of production method. We will compare and contrast each method in detail.
We will also consider how to record the purchase and sale of property plant and equipment.
Next, we will discuss the tracking and reporting of payroll. Payroll is a very large topic because of the payroll laws included in it. We will discuss how to calculate payroll taxes, including federal income tax FIT, social security, and Medicare. We will record journal entries related to payroll. Payroll journal entries are some of the longest and most complex journal entries recorded in the standard accounting cycle.
Next, we will learn partnership accounting. The concepts we learned related to the double-entry accounting system will apply to partnerships. Our focus now will be on those transactions unique to a partnership form of entity. For example, we will discuss how to allocate net income to each partners capital account. A partnership type of entity is very flexible, and there are many different ways partners can agree on to allocate income.
We will discuss how to record transactions when a new partner is added to a partnership or when an existing partner leaves a partnership.
We will also cover how to record the liquidation of a partnership. Much of the liquidation process will apply to the closing of other business entity types as well. However, the partnership type of entity has the added difficulty of allocating the final proceeds to the partners in accordance with their capital accounts.
Then we will consider transaction unique to a corporation format of entity. Like the partnership form of entity, the corporation will use the same double-entry accounting system we learned at the beginning of the course. In this section, we will learn how to record the sale of capital stock and the sale of preferred stock. We will record transaction related to the purchase of treasury stock. We will discuss how to record cash dividends and stock dividends.
Then we will learn concepts related to bonds payable, notes payable, and long term liabilities. Many people are familiar with bonds as a type of investment. We will consider bonds from the other side of the transaction with the issuance of bonds. Bonds are often used as a tool to understand the time-value of money concept and interest rates at a deeper level. Therefore, even if you do not plan on recording many transactions related to the issuance of bonds, it is a useful process to learn valuable concepts. Bonds are often issued at a premium or a discount. The premium or discount is then amortized over the life of the bond.
We will discuss how to record the initial sale of the bond. We will talk about how to amortize the bond discount and premium. We will record transactions related to bond interest, and we will discuss transactions for the dissolution of the bonds.
The course will also cover the recording of notes payable. One of the most complex components of notes payable is the breaking out of interest and principal portion of the payment. For the task of breaking out interest and principal, we will need an amortization schedule. We will build amortization schedules from scratch, a useful skill to understand.
The second complication with notes payable is breaking out the current and long term portion of the note. We will use the amortization schedule to perform the task of calculating the current and long term portion of the notes payable.
Finally, we will discuss how to create a statement of cash flows. The statement of cash flows is on the of primary financial statements along with the balance sheet, income statement, and statement of equity, but the statement of cash flows can be more complicated to construct.
The statement of cash flows represents the flow of cash broken out into three categories, operating activities, investing activities, and financing activities. We have constructed the financial statements using an accrual basis rather than a cash basis. We can think of the statement of cash flows as converting the accrual basis to a cash basis.
We can use two methods when constructing the operating section of the statement of cash flows, the direct method, and the indirect method. The indirect method is more common and often required, even if we also add the direct method. The indirect method starts with net income in then backs into cash flow from operations.
Sample of part to test in the book that comes with the course:
The first questions asked when introduced to any new topic are often:
• What is it?
• Why do I need to know it?
We will address the second question first: why do I need to know accounting?
Answer: Because it’s fun. Because accounting is fun is likely not the first thing that popped into your mind, but we want to start off with this concept, the idea of thinking of accounting as a kind of game, a sort of puzzle, something we can figure out. Thinking of accounting as a game will make learning accounting much more enjoyable.
Accounting can be defined as an “information and measurement system that identifies, records, and communicates relevant information about a company’s business activities”(John J. Wild, 2015).
The process of accounting includes the accumulation of data into a relevant form, which can be used for practical decision making.
Data is often identified using forms and documents such as bills, invoices, and timesheets. Once identified information is input into an accounting system, often an electronic one. The end goal of financial accounting is the creation of financial statements including a balance sheet, income statement, and statement of equity. The financial statements are used to make relevant decisions.
There are many reasons to learn accounting concepts, other than it being fun, although we always want to keep the fun factor in mind. Some of the most obvious reasons for learning accounting include:
· Accounting provides a format to understand business whether we are in the accounting department or not. Accounting is the language of business, a way of communicating business objectives and performance. All areas and departments benefit from understanding accounting because it provides a way to communicate between departments and communication is critical to business success.
· Accounting concepts apply to our personal finances. We all need to deal with our personal finances and learning basic accounting concepts and recording techniques helps ease our mind when dealing with our financial tasks.
Other reasons for learning accounting, which are not so obvious, include that accounting is a great tool to help develop critical thinking skills. Accounting requires reasoning to work through problems, and the practice of accounting will refine reasoning abilities and help us approach problems in a more systematic way, a more efficient way.
Accounting can also provide the same sense of satisfaction we receive when completing a puzzle, when mastering a new musical pattern, or when playing a game skillfully. Accounting can provide the same shot of dopamine when we figure out a problem, discern how something works and can claim that the double entry accounting system is in balance.
Accounting can be compared to a game of checkers
For example, the game of checkers starts with setting up pieces on a board, a spreadsheet, following a set of rules. To set up the board, we need to have memorized the rules for doing so. Memorizing rules is not the fun aspect of checkers but is a necessary one to receiving the enjoyment of playing the game. Once the board is set up the game of checkers is played by moving pieces according to a set of rules to achieve a certain objective, the elimination of opponent’s pieces.
Accounting is similar in that we will start off by learning how to set up the board, the accounting board being a T account or ledger. As with checkers, we will need to memorize where the pieces fit on the board, which side of the T account pieces will line up on. Accounting pieces are the accounts and account types which have a normal balance lining up on the left or right side of the board, of the T account or ledger.
Once we know the normal balance of accounts, we will play the accounting game by applying debits and credits to the accounts following a set of rules which have a particular objective, the creation of relevant information, the creation of financial statements.
The major obstacles for learning accounting are the same as those for learning music.
The primary obstacle to learning accounting concepts is the memorization of rules, a simple task, but one most do not find very enjoyable.
Memorizing rules is the same obstacle holding people back from learning many fulfilling activities, activities like learning music, or a new language. Rules of some kind must be learned to play music. The idea of rules, of structure, of constraints, seems counter-intuitive to the concept of creativity we associate with creating and playing music, but rules, structure, and limitations are often requirements for creativity. For example, writing and especially poetry, requires adherence to strict rules and many great writers have done their best work while constrained by deadlines and editors.
Whether it be notes, chords, or songs rote memorization is required before these learned concepts can be used to create something new, to create or play music, the structure critically contributing to the creation process. Creating, of course, is the fun part, the fulfilling part, the area to look forward to but memorization is a necessary part, a critical part, and a part well worth the effort.
Confidence in the system is required to learn accounting
Education is all about asking questions, testing theories, and being skeptical of claims given without a convincing argument, without supporting facts. Accounting is no different. Questioning is essential to setting up an efficient accounting system, but the tradition of questioning can also be used as a crutch, as an excuse for not moving forward and finding our mistakes.
I recommend accounting students start out having faith that the double entry accounting system works, in a similar way that we have faith that a 1,000 piece puzzle will contain all the pieces required and can be constructed to match the picture on box, because without this confidence we will lose the motivation to move forward, to complete the task, and therefore miss out on the enjoyment of completing the project.
Confidence in the double entry accounting system is necessary when first learning accounting concepts because doubting the system restricts us from moving forward to complete the necessary steps and look for the mistakes we have made. It is much easier to claim that the system does not work then look for the more likely problem, our own errors.
Having faith in a system does not mean we should not question a system. Questions are always encouraged, at all times, but it is best to give the concepts the benefit of the doubt and not allow our questioning of the system to be an excuse, a crutch, for not completing a task or figuring out a problem.
The double entry accounting system has been around for a long time, at least since the Franciscan monk Luca Pacioli around 1494, and while this does not prove its correctness it does show that it has been a useful tool to many in the past, and will therefore likely be a useful tool to many in the future.
Accounting is divided into two major groups; Financial Accounting & Managerial Accounting.
Financial accounting has the end goal of generating financial statements, financial statements designed with external user needs in mind. The aim of financial accounting toward external users may seem strange at first because financial data is required and used for internal, managerial, decision making as well but external users have needs that require more reliance on financial statements in many ways.
External users are users outside the company and include investors, creditors, the internal revenues service, and customers. Companies need these external users for things such as investments, loans, and to follow laws and regulations.
External users do not have intimate knowledge of the business and therefore need assurance to increase the level of trust, trust being a necessary component for business transactions to take place. To increase confidence levels, financial statements are required to follow a strict format of rules designed to standardize the financial reporting. Standardization allows for the comparison of financial information across time and between different companies.
Managerial accounting has the goal of generating relevant information for internal decision makers to make sound decisions, for management.
Managerial accounting does include the use of the same financial information generated in financial accounting, but information is not required to be in a particular format, managerial accounting being less regulated. Management has intimate knowledge of the company, and therefore there is less need for regulations on the format of data and information. Management will determine the best format for managerial statements to assist in making the best decisions.
Because managerial accounting is less regulated, it is commonly thought that managerial accounting will differ greatly from organization to organization. While it is true that managerial accounting practices will vary from company to company, there are also best practices which are applied, practices that have stood the test of time, those that have helped good companies be great. The study of managerial accounting is the study of best practices used to make good business decisions.
Financial accounting developed in much the same way, businesses looking for best practices to compile data for both themselves and external users. Over time financial accounting has solidified those best practices into a standardized form. Standardization often limits innovation but does provide a clear format for external users, this being one of the tradeoffs related to regulation. We will talk more about the need for standardization in a profession like accounting when we discuss what a profession is and the need for ethics and regulations within a profession.
Ethics plays a huge role in accounting as it does in most professions, in part, because ethics deals with trust and trust is an essential component of any business transaction. The concept of ethics is very broad, has been studied intensely since ancient times, and is an area which still has many open questions, but ethics related to accounting can be narrowed from the broader discussion in some ways.
One way to think of ethics as it relates to a profession is by implementing a kind of categorical imperative, acting in a way that we would wish to be universal for the entire profession. For example, stealing could benefit an individual but if everyone steals everyone is worse off and therefore stealing would be wrong.
Similarly acting in a way that is misleading could lead to gains for an individual but doing so harms the profession and is therefore wrong. Most professions can apply a concept like this. two of the oldest professions are law and medicine. The reason professions are needed in areas like law, medicine, and accounting is because they deal with specialized knowledge, knowledge most people do not have and that many are dependent on at some point in their lives. An uneven distribution of knowledge can cause incentives for individuals to seek short term gains through deceit.
For example, somebody claiming to know medicine could administer medicine that is not effective and the patient would not know, a patient having no choice but to trust the expertise of the doctor. If a physician abuses trust by administering remedies that are not effective, they are profiting off the name of the profession, from the brand of the occupation, and if this practice is done enough, it will result in a lack of trust in medicine.
A similar scenario can be painted for many areas of accounting, accounting having advanced to a specialized field, one that most do not understand, but are forced to deal in at some point or another. The need for trust drives and incentivizes a profession to self-regulate, to build a brand. One way the accounting profession self-regulates is by requiring different certifications to practice in different areas, certifications like a certified public accountant CPA license. A certification process helps provide the public with a level of trust that an individual has some basic understanding of concepts they are dealing with and provides ethical standards that must be met.
An example of the need for trust in accounting is when investors use financial statements to make investment decisions. Publicly traded stocks have an increased need for transparency in their financial reporting because their stock is being sold and traded by the public, a huge benefit to both companies and investors, providing capital to companies, and opportunities for gain to investors.
For an individual to invest, however, they need to analyze their options, and financial statements are the primary tool for this analysis. If investors do not have confidence in the numbers reported on the financial statements, do not understand how the numbers are reported, or cannot compare the numbers to related companies, investment transactions will decline due to a lack of information and trust.
The economy needs trust in the system as a major component which keeps interactions taking place, compelling people to take calculated risks, driving individuals to do business and drive growth and innovation.
Fraud is one component in the discussion of ethics, fraud being the deliberate attempt to deceive for personal gain. Fraud can take many forms in business from theft to falsifying the financial statements to drive up stock prices and increase bonus pay.
Most people believe fraud is all about employing the right people, honest people, those with integrity. While the right people is a huge component, it is not the only one. Good people in a bad environment or culture can fall victim to the group mentality. Businesses can reduce the likelihood of fraud by recognizing conditions that foster fraud and taking active steps in reducing them.
A criminologist has introduced the idea of a fraud triangle, consisting of three factors which increase the likelihood of fraud. Fraud factors include opportunity, pressure, and rationalization.
Opportunity means that the ability to commit fraud and not be caught is present, or at least perceived. For example, if a company had a policy of keeping their petty cash fund in a shoebox in the middle of the lunch room the opportunity for theft without detection would be greater than if the money was put into a more secure location.
Pressure or incentive means that a person is under pressure of some kind, often financial. If money if tight the likelihood of an individual committing fraud is significantly increased.
Rationalization is when a person justifies an action. Our minds are excellent at rationalizing. We generally believe that we think before acting, but we often act and then justify the action through rationalization. Rationalization is one reason fraud tends to continue, and even escalate over time.
For example, if a company left the petty cash in the lunchroom an employee may rationalize theft by reasoning that it’s the company’s fault for not better safeguarding their assets. While it may be true that leaving cash in the middle of the lunchroom is not a good internal control for a company, it is not a justification for theft. Another common rationalization is that a company is vast and rich while an employee may feel small and poor and taking to from the rich to give to the poor is not bad. Again, there may be some truth to this statement, but it is not a reason justifying theft.
Companies can reduce the likelihood of fraud by recognizing these fraud factors and taking active steps to reduce them, steps including internal controls. For example, companies should safeguard assets and should create a culture of honesty, communication, and respect, a culture that needs to be demonstrated from the top down. If the culture is bad at the top good employees will not be able to pull up the culture from the bottom.
Objectivity – To provide information useful to investors creditors, and others. The concept of objectivity seems obvious, but we always need to keep the end goal in mind, the creation of useful information for external users. Financial accounting is aimed at producing useful information for external users like investors, creditors, and customers, the format of this information usually being financial statements. By anticipating the needs of external users, we can set rules and guidelines to provide the most value.
Qualitative Characteristics – To require information that is relevant, reliable, and comparable. The characteristics of relevance, reliability, and comparability are related to the objective of providing useful information because external users will value these features.
· Relevant means the information is relevant or necessary to the needs of the users. Relevant information could be information that influences the decision-making process. For example, a bank deciding whether to make a loan to a business may request financial statements to assess the likelihood of a business’s ability to pay the loan back in the future.
· Reliable means that the information must be trusted or must be believed that it is free of material errors and is presented in a fair way. For example, a bank deciding whether to make a loan to a business may request financial statements and want assurance that they can be trusted. Part of the assurance requirement may be that the financial statements are presented in a standardized form, following a standardized set of rules. A bank may also ask for a third-party review or audit to add to the level of reliability.
· Comparability means that financial information needs to be comparable to prior periods and other companies. Comparability requires standardization, a systematic way of compiling data from one time to the next. For example, a bank deciding whether to make a loan to a business may want to compare financial
statement performance with prior years to see if there has been an improvement and to compare financial statements to other businesses in the industry. For comparisons of financial statements to be relevant, there needs to be conformity in presentation.
Going-concern assumption – the presumption that the business will continue operating instead of being closed. We assume a business is in business to stay in business, to have an objective of revenue generation and growth. If a business is planning on stopping business or is going bankrupt their behavior is likely to be much different than if they planned on continuing business. A business that is not a going concern, one that plans on stopping operations, needs to disclose this information to the readers of their financial statements so that readers can change their default assumption that the business will remain in business.
Separate business entity assumption – means that the business accounting will be kept separate from personal accounting and that of other businesses. Separating business accounting and personal accounting is clear conceptually, the separation providing more relevant information for making business decisions, but can be difficult in practice. The driving concept for deciding whether an accounting transaction is business or personal is the objective behind the transaction, the reason for the transaction. Every transaction will have a reason and we need to determine if the reason is business or personal in nature.
The business objective is revenue generation. A business’s mission statement will define what a business does to generate revenue, but from an accounting standpoint, the objective of revenue generation will help guide business actions and help us categorize transactions as either business or personal.
- Aspiring accounting students who have an interest in the topic
- Accounting professionals
- Anyone who whats to learn accounting
- Accounting and business students who want a reference source to the material they can actually keep, unlike most digital textbooks used in most accounting programs these days
- Business professional who want a comprehensive reference to standard financial accounting topics they can refer to
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