Financial Accounting: The Complete Introductory Crash Course

WHAT YOU WILL LEARN: Understand the criteria that needs to be met to recognize an asset. Improperly recording an asset as a liability or an asset as a revenue can have grave consequences. Join us as we go through some examples of assets!

HOW IT WILL APPLY LATER ON:

Understanding how to identify which transactions affect which accounting elements is key to preparing financial accounting information. In financial accounting, we want to capture the true economic activity taking place. Having correct numbers and accounts are key to preparing fair financials.

WHAT YOU WILL LEARN:

We'll go over the definition of a liability and explain why certain transactions will generate liability accounts.

HOW IT WILL APPLY LATER ON:

Understanding how to recognize a liability is key within Financial Accounting. Every transaction affects either an asset, liability or an equity account. By correctly identifying that a transaction involves a liability, you'll be one step closer to preparing journal entries! (Journal entries are the beginning of basic bookkeeping).

WHAT YOU WILL LEARN:

We'll go over the definition of equity and how it relates to assets and liabilities. Using an example, we'll see how equity changes based on the number of owners or asset price fluctuations.

HOW IT WILL APPLY LATER ON:

Many students breeze through this fundamental accounting element without fully understanding it, which normally leads to errors later in the course.

This tutorial will prepare you for:

• Journal entries involving equity accounts
• The Statement of Changes in Equity

WHAT YOU WILL LEARN:

We'll discuss the accounting equation and the logic behind why all transactions must make use of it. To guide students, I will post a few rules that you'll need to follow, and will demonstrate a couple of examples to reinforce the concept.

HOW IT WILL APPLY LATER ON:

The accounting equation is simply one of the most important concepts in financial accounting. Every transaction will need to be entered correctly in order to have reliable financial information.

WHAT YOU WILL LEARN:

Steering clear of fraud should be a top priority for all accountants. The conceptual framework of financial accounting provides us with the guidance to prepare and present financial information fairly. Join us as we break down the concept using an analogy and a fun Christmas tree example.

HOW IT WILL APPLY LATER ON:

One of the most important aspects of the conceptual framework of financial accounting is GAAP (Generally Accepted Accounting Principles). Understanding the basics of the conceptual framework system will provide you with a strong foundation to begin discussing accounting principles like revenue recognition, materiality and the matching principle. 

WHAT YOU WILL LEARN:

Every transaction must have two entries, a debit and a credit. The Double-Entry Accounting System has been used for ages and is vital for the preparation of financial accounting information.

HOW IT WILL APPLY LATER ON:

Understanding which account to debit and credit is paramount to transaction analysis and journalizing entries.

WHAT YOU WILL LEARN:

This tutorial will provide you with the know-how to decide whether an account should be debited or credited. We'll look at the accounting equation to understand the logic behind the debit/credit system so that you won't have to memorize anything!

HOW IT WILL APPLY LATER ON:

Understanding which account to debit and credit is paramount to transaction analysis and journalizing entries.

WHAT YOU WILL LEARN:

After going over the debit/credit system, I thought a normal balance tutorial would help those that are struggling with the concept. We'll go over a bunch of different asset, liability and equity accounts and see the normal balances of each, including the super special RED accounts: revenue, expenses, and dividends.

HOW IT WILL APPLY LATER ON:

Understanding which account to debit and credit is paramount to transaction analysis and journalizing entries.

WHAT YOU WILL LEARN:

In this lesson we'll discuss the Accounting Cycle and provide a general overview of the process used by companies to analyze transactions, report them, and summarize them into general-purpose financial statements.

This first lesson in the segment will focus on transaction analysis and journal entries.

HOW IT WILL APPLY LATER ON:

The Accounting Cycle is a fundamental concept in Financial Accounting that covers all reporting elements from beginning to end of an accounting period. Journal entries (this lesson) are a core component of the Accounting Cycle. It's important that you analyze the transaction/event and debit/credit the correct accounts. 

After this tutorial you'll be able to create a fully working general ledger that houses all of the accounts for a company. The general ledger is the overview of all accounts used in a company and their respective balances.

The trial balance is our first checkpoint that confirms whether or not the majority of our entries are correct. A trial balance that displays debits not equaling credits is a red flag. Learn to compile a trial balance statement now!

WHAT YOU WILL LEARN:

In the next few lessons we'll continue on with the accounting cycle and learn about accrued expense adjusting entries. Understand the purpose of adjusting entries along with a few simple rules that will guide you.

HOW IT WILL APPLY LATER ON:

Adjusting entries are a super important concept in financial accounting. Because companies often use the accrual basis of accounting instead of the cash basis, we'll need to report revenue and expenses when they occur. Adjusting entries are used for that exact purpose. You should understand by the end of the lesson how adjusting entries are used to comply with the matching principle under GAAP.

If you lease an office, there might be a chance that you prepaid the rent for an entire year. Learn how to use adjusting entries to delay the recognition of expenses until until the asset is "used."

In this tutorial we learn how to create an adjusting entry for unearned revenue using subscription cash that was collected in advance. The adjusting entry will debit the unearned revenue account (liability) and credit the revenue account as we earn the revenue. Remember that adjusting entries never involve cash and that we adjust accounts at the end of an accounting period which is the month end. 

Revenues aren't just about receiving cash. Revenues are reported when we have a claim to cash in the future via the account, accounts receivables. Learn how to accrue revenue when performing adjusting entries.

Amortization and depreciation isn't about trying to find the decline in value of a certain asset. It's to show the allocation of cost over the asset's useful life. Learn about the difference between the terms "depreciation" and "amortization" while we report for each.

Learn how to update your original trial balance statement by factoring in adjusting entries and preparing your adjusted trial balance statement!

Remember when we went over some of the general financial statements you'll encounter in financial accounting? Well today we get to prepare them! Join us as we go through the income statement, retained earnings statement and the balance sheet.

Some accounts that we use within financial accounting will be permanent (real) or temporary (nominal). Learn how to differentiate between the two and why only certain accounts are temporary.

We're closing up the books! Join us as we close the temporary accounts that exist on our books and transfer the balances to permanent (real) accounts. After this you can say you've studied the accounting cycle!

Inventory is the heart of many corporations including, Walmart, Costco and other retail corporations. Receive an introduction to our chapter on merchandise inventory!

A quick comparison between the perpetual and periodic inventory system. This is important before we learn to account for transactions in a perpetual or periodic system, so make sure to watch!

After watching this tutorial you'll be equipped with the ability to report purchase transactions on the books of your company (if it uses a perpetual system).

After watching this tutorial you'll be equipped with the ability to report sales transactions on the books of your company (if it uses a perpetual system).

The multiple-step income statement is the standard for preparing an income statement. It has a line that displays the cost of goods sold so that we can establish our gross profit margin. Learn how to prepare a multiple-step income statement!

After watching this tutorial you'll know how to report purchases on the books of a company that uses a periodic inventory system.

We tie the periodic inventory system together with the multiple-step income statement in this tutorial. Can you spot any differences between the way the multiple-step income statement is prepared under the perpetual system versus the periodic system?

The specific identification method tracks each item that is sold rather than using any cost flow assumption (like FIFO or Average Cost..which we will soon learn about!). This method is normally used for a small number of highly costly, easily distinguishable items.

The FIFO or first-in-first-out method is a cost assumption used to expense our merchandise inventory. Learn how to attribute cost to items that are sold and how FIFO may affect our cost of goods sold figure that is super important to investors and users!

The average cost or weighted average cost method is a cost assumption used to expense our merchandise inventory. Learn how to attribute cost to items that are sold and how the average cost method may affect our cost of goods sold and ending inventory figure!

LIFO or last-in-first-out is becoming an obsolete cost flow method. It is PROHIBITED under IFRS standards (companies that are public and on a stock exchange) and is only permitted under US GAAP. Learn about this method and why its use is diminishing.

Using the weighted average cost flow method is a bit different under the perpetual inventory system. We'll have to create a moving average when calculating our cost of goods sold and ending inventory. Learn about it in this tutorial!

This is a MUST WATCH tutorial that compares the different inventory cost flow methods. It shows how cost of goods sold or ending inventory might differ based on an inflationary or deflationary economic environment. Learn this to master your theory on inventory!

This is the introduction to the allowance method. The allowance method is used for receivables that are likely uncollectible. The allowance method provides us with an opportunity to show the expense in the correct period (matching principle) while retaining an accurate net realizable value of receivable.

This is an expansion on the topic of the allowance method. It'll provide you with the fundamentals before we can apply the sales and receivables method to report uncollectibles.

The sales method is one method to recognize bad debts expense. Using an estimated percent, we'll write off a certain amount of collections (normally it's low at 1,2,3%). This is super useful since many companies use the percentage-of-sales method to report uncollectible receivables!

The receivables is the second method that we may use to recognize bad debts expense. In this tutorial we'll show how to apply the receivables method since it is a bit more complicated than the percentage-of-sales method.

Aging tables are commonly used when accounting for bad debts using the percentage-of-receivables method. An aging table lists all receivables and stratifies them based on their age (older receivables being less likely to collect). Based on the amount of receivables that we expect to be uncollectible will affect our bad debts expense figure. This tutorial should help you master the percentage-of-receivables method.

In this video we simply look at the write off of uncollectibles after a bad debts expense and allowance for doubtful accounts account has been reported. This tutorial will equip you with the ability to write off uncollectibles and reverse any mistakes or uncollectibles that become collectible.

The direct write off method is used by small shops or companies when they decide that the allowance method is too complex for their books. This method is simple but flawed when reporting and accruing bad debts expense and uncollectibles.

This video is SUPER important since revenue recognition is one of the most important concepts. Companies that have used bad judgement with respect to revenue recognition have been known to collapse (Enron). Join us as we go through a tutorial that begs the question, when should we recognize revenue?

After going over the criteria for recognizing revenue, I've decided to bring up three (difficult) examples where revenue recognition might be questionable (as to when it should happen). After this tutorial you should have a sound understanding of when to recognize revenue.

When should we recognize revenue if we are in the middle of a 20 year construction (condominium) project? Normally the answer is gradually over the period. Join us as we look at a summary of methods we may use for recognizing revenue for long term contracts.

In this video you'll learn how to account for a long term contract using the percentage-of-completion method for recognizing revenue. This method is used under IFRS and is standard for long term contracts. Come out of this tutorial understanding one of the most common methods for reporting long term contracts.

NOTE: There is a transpositional error in this tutorial where the revenue to date (@4:25) should be $3,528,000 and not $3,582,000.

If you follow the logic and flow of the tutorial you should still understand the percentage of completion method for long term contracts. :)

After this tutorial you should have an understanding of how to record journal entries pertaining to a long term contract that uses the percentage-of-completion method.

NOTE: There is a transpositional error (from the first percentage of completion tutorial) in this tutorial where the revenue to date should be $3,528,000 and not $3,582,000.

Normally we expect a gross profit year-to-year on our long term contract. What happens if we incur a loss? Or a loss on the entire contract? Watch this video to prepare for the worst!

NOTE: There is a transpositional error (from the first percentage of completion tutorial) in this tutorial where the revenue to date should be $3,528,000 and not $3,582,000.

The cost recovery method is an alternative to the percentage-of-completion method when the percentage-of-completion method is inappropriate to use. This method reports all revenues and expenses but defers all income until total cash receipts have exceeded costs. Learn this alternate method now!

The completed-contract method is still a valid method used under ASPE or PE GAAP. It is PROHIBITED under IFRS. The completed-contract method is super conservative in that it reports no revenues, expenses or gross profit until the contract is complete.

Normally we expect a gross profit year-to-year on our long term contract. What happens if we incur a loss? Or a loss on the entire contract? Watch this video to prepare for the worst under the completed-contract method!

What is depreciation or amortization? It most certainly is reported on almost EVERY financial statement issued by a company. Learn about this concept before we head into some calculations!

Get ready to learn the straight-line and the declining balance method for recognizing depreciation or amortization expense. This should prep you for the next tutorial we have which will involve some calculations!

We'll go over some examples in this tutorial for calculating depreciation expense using the straight-line or declining balance method. This follow up tutorial is perfect for getting ready for a test that includes the topic of depreciation.

What happens when we decide to get rid of a long lived asset like a car or property? What if it's something smaller like a piece of equipment? Well depending on the proceeds ($) you receive will determine whether or not you might have to report a gain or a loss! Perfect for students and those reporting financials!

NOTE: The question should state July 31,2015 in the video instead of July 31, 2014.

Intangible assets can be some of the largest and most valuable assets on a company's books. We'll introduce you to the topic of intangibles and provide you with examples of some like logos, trademarks, copyrights etc!

If you've made it this far you should understand how to depreciate a physical capital asset. It only makes sense that we help you understand how to amortize intangible assets. Go over some examples with us to get prepared for a question like this on a test!

Just like any asset, intangible assets can become impaired. When do we report an impairment charge and how do we report it? It's all covered in this tutorial!

You can also credit the Accumulated Amortization (patent) account instead of just Patent when there is an impairment loss. Both will provide an accurate net book value @5:38.

Many students struggle with the concept of goodwill. We've decided to simplify it into a quick 10 minute tutorial that will teach you the basics of this asset.