An Introduction to Financial Accounting
Have finally finished this 10-week long course, and the SoA shall be issued in recent days 🙂
It’s not that easy… During the process the learning, my laptop had broken twice… once for hard drive, one for Graphics Driver..
And this course also crossed the National Holiday (Oct 01-07), during which I had planned travelled independently to Bangkok, Thailand. And the daily schedule is mostly like to learn in the morning and go sightseeing from noon till evening~
By taking this course, I’ve gain some accounting skills, which would be helpful to apply on work.
Week One: Introduction and Balance Sheet:
Video lectures posted on September 16, 2013 (all videos will be posted by 12:01 am U.S. Eastern Time on the start date)
Homework #1 based on this material due by September 29, 2013 (note that an extra week is given to accommodate late starters)
To learn a foreign language like Accounting, you need quite a bit of practice in the basic foundations (grammar, syntax, idioms, etc.). This material is not fun, but it is absolutely essentially for being able to read and to understand books written in the language (in our case, financial statements.). This week, we will starting building these foundations. We will start with an overview of financial reporting. What types of reports are required? Who makes the rules? Who enforces the rules? Then, we will cover the balance sheet equation and define/discuss Assets, Liabilities, and Stockholders’ Equity. We will introduce debit-credit bookkeeping and do lots of practice in translating transactions into debits and credits. Finally, we will introduce a case of a start-up company to provide you insights into all of the steps necessary to go from recording the first transactions of a new business all the way through its first set of financial statements.
Week Two: Accrual Accounting and the Income Statement:
Video lectures posted on September 23, 2013
Homework #2 based on this material due by October 2, 2013
More foundations this week. If you are not sick and tired of journal entries by the end of this week, then I have not done my job! We will start with a discussion of Accrual Accounting and how it affects the recognition of the Income Statement accounts: Revenues and Expenses. Then, we will cover adjusting entries, which are needed to prepare our internal books for the upcoming financial statements. Finally, we will discuss closing entries and the preparation of the Balance Sheet and Income Statement. At each stage, we will continue to work on the case of our start-up company.
Week Three: Cash Flows:
Video lectures posted on September 30, 2013
Homework #3 based on this material due by October 12, 2013
Cash is King! In what will be our last “foundations” week (i.e., hard and not that much fun), we will talk about cash flows. We will start with the classification of cash flows into operating, investing, and financing activities. Then, we will work on preparing and analyzing the Statement of Cash Flows. We will wrap up the case on the start-up company by preparing and analyzing its Statement of Cash Flows. Finally, we will discuss the differences between Earnings, Cash from Operations, EBITDA, and Free Cash Flow.
Week Four: Working Capital Assets:
Video lectures posted on October 7, 2013
Homework #4 based on this material due by October 19, 2013
Now that we have a solid grasp of the foundations, we are going to work our way around the Balance Sheet to discuss various types of Assets, Liabilities, and Stockholders’ Equity (along with their associated Revenues and Expenses) in more detail. We kick off with Accounts Receivable and the problem that some customers that buy goods on credit will not actually pay us. We will look at the computation, disclosure, and analysis of such “Bad Debts”. We will also briefly discuss other Accounts Receivable issues such as Factoring and Securitization. Then, we will move on to Inventory. We will discuss how Inventory accounting differs between retail and manufacturing firms. We will see how companies figure out the cost of the inventory they sold, which requires assumptions about cost flows. This discussion will lead us into covering one of the most infamous accounting topics: LIFO.
Week Five: Ratio Analysis and Mid-course Exam:
Video lectures posted on October 14, 2013
Mid-course Exam posted on October 16, 2013, due by October 23, 2013
We will have our first of two exams this week. Because of the exam, I will cover Ratio Analysis, which will not involve any “new” material. While we will define and discuss a number of ratios, they will all basically involve dividing one accounting number by another. But, the analysis of what those ratios mean will involve a deep understanding of Balance Sheet and Income Statement accounts. Thus, the Ratio Analysis videos will help provide a nice review of the material so far, which will help you prepare for the exam.
Week Six: Long-lived Assets and Marketable Securities:
Video lectures posted on October 21, 2013
Homework #5 based on this material due by November 2, 2013
Back to new material! This week, we will cover assets that represent longer-term investments. We will start with Property, Plant, and Equipment, covering questions like: What gets included in these accounts? How are they depreciated? What happens if their value is impaired? Then, we will cover similar questions for Intangible Assets, including Goodwill. Finally, we will discuss how companies account for investments in debt and equity securities and how the treatment for equity investments in other companies is determined by how much of the other company is owned.
Week Seven: Liabilities and Long-term Debt:
Video lectures posted on October 28, 2013
Homework #6 based on this material due by November 9, 2013
We move to the right-hand side of the Balance Sheet this week with a look at Liabilities. We will start by covering time-value of money, which is the idea that $1 today is not worth the same as $1 in the future. Almost all liabilities involve a consideration of the time-value of money, so this will be an important foundation piece for you to understand. Then, we will cover accounting for bank debt, mortgages, and bonds. Next, we will move into the topic of “off-balance-sheet” liabilities with a discussion of Contingent Liabilities and Leases.
Week Eight: Deferred Taxes:
Video lectures posted on November 4, 2013
Homework #7 based on this material due by November 16, 2013
There are two certainties in life, and we will cover one of them this week (the other is beyond the scope of the course). We will NOT teach you how to prepare your own tax return. Instead, we will discuss how companies have to prepare “two sets of books”: their financial statements and their tax returns. The rules are different for these two sets of books, leading to permanent differences and to temporary differences. We will cover both types of differences, with a main focus on “deferred taxes”, which are the byproduct of temporary or timing differences between tax reporting and financial reporting. Finally, we will touch on other tax issues, such as Net Operating Loss Carryforwards and the rule that requires companies to disclose how much they are trying to cheat on their taxes (sorry, that should say “use tax planning strategies to manage their taxable income”).
Week Nine: Stockholders’ Equity:
Video lectures posted on November 11, 2013
Homework #8 based on this material due by November 23, 2013
Our final week of new material ends at the bottom of the Balance Sheet: Shareholders’ Equity. We will talk about issuing stock, repurchasing stock, Treasury Stock, stock dividends and splits, Accumulated Other Comprehensive Income, and stock-based compensation. We will also finally cover the fourth required financial statement: the Statement of Stockholders’ Equity.
Week Ten: Financial Statement Analysis and Final Exam:
Video lectures posted on November 18, 2013
Final Exam posted on November 20, 2013, due by November 27, 2013
Final Exam week! The video lectures will give tips on how to do a complete financial statement analysis. In the prior weeks, we have used the 3M Company videos to show where the material we have covered can be found in the annual report. This week, we will discuss much of the other information you can learn from an annual report, including the company’s business, strategy, and competitive environment; its growth prospects and recent performance; its investing and financing activities; and any off-balance sheet activities that could pose problems in the future. These lectures will not be covered on the final exam. The final exam will be posted on November 20, 2013 and be due by November 27, 2013, which is the day before Thanksgiving Day in the United States. Even if you are not an American, you will certainly be giving thanks on November 28 because the course will be over and you will be able to impress your family, friends, and co-workers with your vast knowledge of Financial Accounting!