Financial and Management Accounting Crash Course

Explore revenue recognition using the point of sale method, recognizing revenue at the delivery of the good or service to avoid overstating or understating earnings.

Learn the installment sales method: recognize revenue at sale up to cost of goods sold, and defer the remaining profit until cash is collected.

Apply the cost recovery method to defer revenue recognition until cash collections exceed the cost of goods or services sold. Recognize revenue when cash collections surpass costs.

Learn revenue recognition with completed contract method, recognizing revenues and gross profits after project completion when completion cannot be estimated or cash is uncertain, and compare with completion percentage method.

Recognize revenue using the percentage of completion method, measuring progress by the total estimated cost and recognizing one third, then two thirds as work advances, not based on cash.

Apply straight line depreciation to a fixed asset held beyond one year, spreading its cost over several years by dividing asset value by number of years for tax reasons.

Apply activity method depreciation by allocating cost based on units used relative to total expected production, such as 200 of 1000 units for a 10,000 asset.

Master accelerated depreciation concepts, including straight-line and double declining balance methods, 150% factors, 1/5 year timing, and tax-benefit effects across five-year asset amortization.

Illustrates the sum-of-the-years-digits depreciation method, using the sum of remaining years over the total years to compute depreciation, as shown with a 10,000 asset example.

Explain lessee lease methods, including operating leases and capital (financing) leases, and apply IAS 17 criteria: ownership transfer, purchase option, lease term, and present value of payments.

explain how lessor lease methods differ, including operating, direct financing, leveraged, and sales-type leases, per IFRS standards, with emphasis on title transfer, cost, and substance over form.

Explore ratio analysis by understanding how ratios reflect mathematical relationships among numbers at a point in time, covering activity, liquidity, leverage, profitability, return on investment, asset management, and investment valuation.

Explore how debt and leverage ratios assess a firm's risk and return, focusing on operating leverage, fixed vs variable costs, CVP analysis, and debt ratio and debt-to-equity ratio.

Learn to assess short-term liquidity using the current ratio and quick ratio, focusing on cash, marketable securities, and accounts receivable while excluding inventory.

Compare current assets to current liabilities to derive the current ratio, examining a 1000 vs 2000 example resulting in 0.5. Apply the quick ratio using cash, yielding 0.3.

Calculate net working capital, not a ratio, as current assets minus current liabilities to show solvency, assuming accounts receivable paid on time, accounts payable not delayed, and marketable securities stable.

Explain profitability ratios—gross profit margin, operating profit margin, and net profit margin—derived from net sales and cost of goods sold, and why higher margins indicate cost control.

Explore ratio analysis with return on assets (ROA), measuring how well assets generate net income by applying net income over average total assets across two years.

Analyze the price to earnings ratio (PE ratio) by comparing stock price to earnings per share and assess whether a high or low ratio signals overvaluation or future earnings confidence.

Explore book value per common share, an older measure that reflects liquidation value and the portion of common shareholders' equity per share, contrasted with earnings per share.

Explore the dividend payout ratio and dividend yield, linking dividends per share to earnings per share and market value, and see how these ratios guide income-focused or growth-focused investors.

Analyze activity ratios such as accounts receivable turnover, accounts payable turnover, inventory turnover, and fixed asset turnover, and learn how DIO plus DSO minus DPO captures the cash conversion cycle.

Analyze capital budgeting and structure through the master, capital, and operating budgets, and see how financial budgets align uses of funds with sources of funds for large projects and operations.

Explore the time value of money and the concepts of present and future value, illustrated with compounding at 8% and money doubling roughly every nine years.

Examine net present value (npv) and internal rate of return (irr) by analyzing initial investment, cash inflows and outflows, and the effect of discount rates on project viability.

Explore the payback period without discounting, tracking cumulative cash flows to determine when the investment is paid back, which occurs in the fourth month of the fourth year.

Understand the accounting rate of return (IRR) and how to estimate it from projected increases in operating income relative to the initial investment, such as 1 million on 5 million.

Define responsibility centers as units accountable for activities and results, including cost centers like audit and human resources, profit centers managing costs and revenues, and investment centers for capital budgeting.

Explore cost accounting concepts like cost objects and cost drivers, and distinguish direct costs, such as leather for a shoe, from indirect costs like workshops and staff.

Master cost-volume-profit analysis to see how variable and fixed costs affect profit, compute contribution margin from net sales (gross sales minus cost of goods sold), and identify the break-even point.

Explore product costing systems, including managerial costing for inventory and cost of goods sold, and absorption costing versus variable or direct costing, where fixed overhead becomes a period cost.

Explore how costs accumulate and allocate to cost objects using direct materials, direct labor, and overhead, through actual, normal, and standard costing with predetermined rates for jobs and processes.

Activity-based costing identifies activities such as ordering materials, production, and invoicing, and allocates costs to cost objects like red and blue bikes using cost pools and activity cost drivers.

Identify which costing methods fit different production environments, including job order costing for unique jobs and process costing for mass production. Show oil refining as process costing in mass production.