Financial accounting is the language of business. In business, we use financial accounting to report everything we do. Whether it’s paying our employees, issuing a dividend to shareholders or purchasing a capital asset, we report it. Bookkeeping ensures that we have a history of every economic activity. Summarizing all of these transactions into financial statements provides us with a general snapshot of our performance and position in the marketplace. Having this financial information at our fingertips is key to future planning and decision making.
When we start our Introduction to Financial Accounting you’ll familiarize yourself with the principles that can be applied to business scenarios, time and time again.
Get ready to explore topics like..
I look forward to discussing any questions you might have in class! :)
Dig in deep as we go over the basic idea of "What is Financial Accounting?"
This quiz should be taken after watching the What is Financial Accounting video tutorial.
You might have a business plan in mind and a product to start off your business, but how about a business structure? We go over examples like a sole proprietorship, partnership (LLP) and a corporation. Learn about the benefits and disadvantages of each!
We know that users are kept in mind when preparing financial information and statements. They're the reason we prepare financial accounting information in the first place! Learn about internal and external users that we will commonly see throughout our videos.
Every company that carries on business has transactions. Whether they are transactions to issue shares, buy capital equipment or hire employees, they can be split into three separate business activities. Learn about these three business activities and understand how to differentiate between them.
This quiz should be taken after the Business Activities: Operating, Investing and Financing Activities Tutorial.
This tutorial is meant to provide a general overview of the financial statements that we'll be working with in upcoming tutorials.
Elements are the language of financial accounting. Without financial accounting elements it would be like trying to communicate without words. Familiarize yourself with these key terms so that you're not the one lost in translation. Become the jargon master!
Everyone loves to hear the term asset. It usually means that we're expecting some economic benefit in the near future. Do we always have to own an asset for it to be recorded as an asset? Are assets always a benefit to our company? We'll answer those questions here!
Is a mortgage an asset or a liability? How about revenue that we haven't earned yet? Join us as we go through some examples and reason as to what a liability might be!
Equity represents the residual interest owners have in the business after liabilities. This is why they normally call equity the "net assets" element! We'll go through equity accounts like common shares (used to raise cash for that next expansion!) and retained earnings and see how they mix into the swing of things!
The accounting equation is a vital concept that pertains to financial accounting. EVERY transaction that we report will have an impact on the accounting equation. If the equation doesn't balance you're in trouble!
One of the most confusing theoretical topics is explained simply in this tutorial. We'll go over the conceptual framework of financial accounting and discuss how it guides accountants and students to use the right judgement when reporting economic transactions.
Every transaction must have two entries, a debit and a credit. This system has been used for ages and ages and is vital to the preparation of financial accounting information.
After this tutorial you'll be equipped with the ability to report transactions since they are merely accounts that are debited or credited. Make sure that you DON'T begin this tutorial with the notion that debit means to subtract while credit means to add!
Every account within financial accounting has a normal balance. By watching this tutorial you'll be familiar with the normal balances of some of the most common accounts used in financial accounting.
The accounting cycle is a continuous circular model that is performed year round by accountants. We'll begin to learn about transaction analysis by identifying economic transactions, deciding which accounts to use, and how much to increase/decrease them by.
This quiz should be taken after the Journal Entries and The Accounting Cycle Tutorial.
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.
This quiz should be taken after the General Ledger, T Accounts and The Accounting Cycle video tutorial.
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!
This quiz should be taken after the Trial Balance Statement and The Accounting Cycle video tutorial.
Adjusting entries are a super important concept within financial accounting. Adjusting entries are used to comply with the revenue recognition principle so that revenue is reported in the right period and so that proper matching of expenses with revenues is done. We'll start by looking at accrued expenses!
This quiz should be taken after the Adjusting Entries for Accrued Expenses video tutorial.
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."
This quiz should be taken after the Adjusting Entries for Unearned Revenues video tutorial.
We'll expand the concept of adjusting entries by discussing unearned revenues. Unearned revenues are a liability that must be adjusted as we earn the revenue. Learn about this adjusting entry now!
This quiz should be taken after the Adjusting Entries for Prepaid Expenses video tutorial.
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 as we earn it!
This quiz should be taken after the Adjusting Entries for Accrued Revenue video tutorial.
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.
I worked on my BComm, majoring in Accounting and Finance at Ryerson University and am currently a CPA student. I've run Notepirate (an accounting and finance website) for 5 years and have worked as an Accounting and Finance educator for 6 years. My videos have been used by countless CPA websites and continuing education websites like TVO's, Independent Learning Center.
Growing up in Toronto (Canada) I started my Accounting education in high school at North Toronto Collegiate. Like many of you, I struggled to master the fundamentals of Accounting which eventually lead to me being frustrated and confused. I understand this feeling (that you might be having) much too well.
During the summer I took some time to go back and re-read everything from the beginning. I focused on the fundamentals specifically, because everything you learn in Accounting is derived from them. This provided a strong foundation for me to teach Accounting because of my original confusion with the subject but also my subsequent clarity of the subject.
When I explain concepts, you're going to see that I not only provide lectures on the subject, but also provide a deep understanding of the material.
Accounting and finance has not only influenced my professional life but also my personal life. Decisions are made on a daily basis. I believe that a strong education in Accounting and Finance equips us with the know how to make sound decisions.
I look forward to working with you all :)