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75 Cards in this Set
- Front
- Back
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Effective Cost of Discount |
{Discount % /1- Discount %}*(365/ Net period - Discount Period) |
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Perpetual Inventory System |
Beginning Inventory + Purchases - COGS = Closing Stock |
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Periodic Inventory System |
Beginning Inventory + Purchases - Ending Stock = COGS |
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Depreciation Activity Method |
(Depreciable Base * Units produced or hours used)/ Total units of Production or total hours usable over life |
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Single Line Method |
Depreciable Base / estimated years of life. |
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Accelerated Depreciation MethodSum of the years digit method Sum of the years digit method |
Years of useful life Remaining/ Sum of all useful life Sum of all years of useful life- n(n+1)/2 Remaining imagine from the beginning of the year First of year of 7 year life - Remaining years is 7 |
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Accelerated Depreciation MethodSum of the years digit method Sum of the years digit method
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Years of useful life Remaining/ Sum of all useful life
Sum of all years of useful life- n(n+1)/2 Remaining imagine from the beginning of the year First of year of 7 year life - Remaining years is 7
Or if 7 yrs, take 8 in calculation to sum Multiply with Depreciable Base
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Cost to.Cost Percentage Complete |
To date Costs/ most recent estimate of Total costs |
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Loss or gain on disposal of discounted operation |
= ( Carrying Value - GAAP adjustments) - ( Fair value - Selling Costs) |
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Declining Balance Method |
Straight Line Depreciation* 1.5 if one and a half declining Straight Line Depreciation * 2 if Double declining balance. If 10 yr life it's 10% and DDB . It's * 2
Declining has just doubles and thriples |
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A short term note is long term in that yr itself if |
The company intends to refinance it The company demonstrates an ability to refinance it. |
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Operating activities |
Interest on loan Reciepts of dividend |
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Investing activities |
Granting loan Purchase of other co debt or securities |
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Financings activity |
Issuing debt loan or equity Paying dividends Reacquiring stock |
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Comprehensive income |
Reporting unrealised gains and losses outside net income Either a as part of income statement or seperate comprehensive income statement But not shareholders equity |
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Account recievables bad debts |
Bad debts is normally operating expenses or other expenses depending on frequency when bad debts allowance is adjusted it is adjusted in p and l |
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Inventory is recorded |
When goods are received by buyer Except Consignment Goods in transit Fob shipping point common courier agent at port mostly
Fob destination buyers warehouse Sale agreement Books return so with allowance and sale Sales with buyback So liability of charges to be paid to buyer and inventory is both recorded in sellers bs |
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Inventory what cost to include |
Manufacturing oh included fixed variable direct indirect but relatable and trackable to the production Interest on procuring inventory not included only if its fixed or internally constructed assets discrete projects ships and lease of real estate |
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Perpetual and periodic lifo |
Perpetual lifo Little complicated Periodic lifo Cs is just beginning inventory enough |
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Lifo liquidation |
Older costs are base layers Thus is when sales exceeds purchases Lifo records cost at different purchase time and costs but sells It at current costs so somewhere there is profit. That is lifo liquidation This reduces Benifit if using lifo One solution is specific goods poooled lifo When sales prices are rising lifo liquidation results in higher income and tax. This reduces Benifit if using lifoOne solution is specific goods poooled lifoGroups similar items Into pools. This liquidation is offset by increase of others. And reduce in fluctuation. But since company change product mix thus pools must be redefined. Another solution is to use dollar value and increase. Or decrease in cost pools by pool value. Reduction in lifo liquidation. Groups similar items Into pools. This liquidation is offset by increase of others. And reduce in fluctuation. But since company change product mix thus pools must be redefined. Another solution is to use dollar value and increase. Or decrease in cost pools by pool value. Reduction in lifo liquidation. . Another solution is to use dollar value and increase. Or decrease in cost pools by pool value. Reduction in lifo liquidation. . Reduction in lifo liquidation.
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Lifo and fifo |
Lifo has less hiding gains Where holding gains is the difference between historical cost and replacement cost Gaap allows lifo ish doesnt |
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Inventory error |
Misstated ending inventory Everything affected Misstated purchase Since purchase and ending inventory is both not recorded it leads to same cogs But current ratio overstated |
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Equity method of accounting |
Recorded at acquisition cost +fees. And Increased by income and reduced by dividend And to avoid double counting Intercompany transactions should be eliminated Fv and bv differences of fixed assets should be depreciated. And if no fv can be determined, cost price and bv differences is adjusted as good will Proportionate share of extra ordinary items and discontinued operations is now investors eo and do now. As well as changes in accounting policy |
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Holding greater than 50 % |
It's purchase accounting and end of the yr no. More investment Ac and all. Assets are recorded in the BS of parent company. Purchase accounting records value of acquired firm in( fair) value plus fees and assets at fv and any difference between amount paid and fv is goodwill and impairment should be treated annually and impaired |
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Deferred tax liability |
The firm pay less tax now but will pay in future Tax for tax reporting is less but tax in books is more
Taxable income less =deferred tax liability remember less liability Taxable income more=deferred tax asset
Gaap and irs which will never be reversed is Change in tax rate Deduction in dividend received -part of dividend revived is tax deductable. But not in financial reporting Unzip also interest income Percentage depletion -It's tax deducatble Govt tax exemption It should be current or non current depending on its nature |
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Impairment of asset |
Not increased value of ppe is recorded but value cannot be recorded through sale low value is recorded. Recoverability test Steps 1 Sum of discounted cash flow is less than carrying value its impaired if vice versa then its not Step 2 If impaired, it's recorded to. Fair value and impairment loss is recorded Mv is used as fv or sum of discounted cash flow if no mv Impairment loss is recorded as other expenses and losses from continuing operation not extra ordinary |
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Intangibles |
Purchased intangibles are valued at Amortized cost Intangible lack physical substance and not financial instruments They are non current. They are indefinite check for impairment If definite amortize till 0 normally doesn't have salvage so use. Straight line. Method. |
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Goodwill is excess of a-b where |
A is consideration Fv of non controlling interest Fv of Equity already held I. The company
B Net value if assets - liability
When calculating assets and liability it's based on fair value And differences of net asset is good value I think below is purchased goodwill
Goodwill impairment is checked annually When fv is less than carrying value. But is not Amortized. Impairment of goodwill same as ppe |
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Intangibles amortization |
Impairment of definite intangibles There is amortization and impairment as ppe For Indefinite same but no amortization |
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Warranty |
It is recorded when product is sold. Normally Cash basis If unlikely if warranty will be incurred. Or. Not estimable or Immaterial. And recognized only when it is incurred and not when product is sold. Expense warranty approach For attached warranties Expensed yr of sale. And a liability is created for estimated liability under warranty Sales warranty approach Extended warranty and is recognized over the life of the warranty. |
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Off balance sheet |
Operating lease Factoring Buyback Joint venture Special security vehicle or project financing |
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Operating loss carry back and carry forward |
Carry back carry forward option Use operating loss to absorb loss of 2yrs taxable income(recorded as refund recievables) behind where the earliest yr is absorbed first and then forward 20 Yrs.(deferred tax asset) Carry forward Ol to absorb 20 Yrs future loss Ie it is attractive of tax rate increases
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Capital lease when any of the |
Transfer of title Bargain purchase option Lease term is 75% of useful life Present value of lease payments is = to 90% of fv
If so leased asset is in asset of BS and obligations of lease is in liability of bs It record depreciation too. |
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Stock |
Can be issued at parties and no par But no par. Has something called stated value similar to par value |
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Preference Share |
It's a hybrid but not allowed to vote. And no maturity value so similar to equity |
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Treasury stock is either valued by |
Cost or par Cost records the reacquired stock, at cost and when reissuing it uses additional paid in for excess
Par records the reacquired at par and rest. Same . If retired as per cost or par is shown below. |
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Esop |
To raise capital and provide employees with a sense of ownership but its non compensatory Only small discount |
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Equity share option |
On date of giving stock option to employees the fair value is measured using an option pricing model. The fair value is recorded as additional paid in capital and compensation over the user service period (the period employee renders service in exchange for compensation between date of grand and date option become exercisable ) |
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Warrants |
They are expensed when recognized normally come with bonds and stuff |
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Dividends |
Are a liability the day they are declared.
Property dividend is based on fv and loss between thier carrying value and fv is recorded the day they are recorded. Even if property that amount should be reduced from Retained earnings Liquidating dividends It's return on invested capital and not return on investment because it's taking from paid in capital Cumulative Scrip. Promise to pay dividend like a substitute Stock dividend Small 20 to 25% reduce Retained earnings by market vakue More than 25% of outstanding. Reduce Retained earnings by par value. stock split. |
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Revenue recognition |
Model Identify the contract with customer Identify seperate performance obligations in the contract Determine transact price Allocate transaction price to obligations Recognize revenue when each obligation is completed
Fasb states Sale of product - date of sale or delivery to customers Service free - after service is performed and billable Interest rent royalty ad time passes Gain or loss of non inventory assets is on Date of asset |
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Channel stuffing Or trade loading |
Practice of convincing retailers to buy more wholesale so they can inflate revenue. Is discouraged |
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Revenue recognition before we delivery |
Completion of production where demand is unlimited and selling price is set by market Percentage of completion |
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Revenue recognition after delivery |
Installment sales Cost recovery. Recognized after the cash received exceeds cogs. Used when collecting is uncertain Deposit method. When a buyer gives a advance. It is not recorded until after the product is delivered |
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Long term project revenue recognition |
Percentage of completion based on cost and multiplied with profit or rev Completed contract for short term |
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Revenue recognition under gaap |
Evidence of arrangement exist Delivery has occurred or service provided There is a fixed price Collectability is assured |
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Losses in current period |
Even if loss on current period and overall project Is profitable the loss should be recognized d to offset excess growth of profit previously recognized. |
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Life on unprofitable contract |
If overall loss is projected is expected the entire loss must be recognized under completed and percentage of completion Eg if §100profit and in yr 2 §50loss on whole contract, total loss should be 150 loss |
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Comprehensive income. |
The change in equity during a period from transaction and events from non owner sources. Changes in equity except investment and distribution to and from owners. Both realized and unrealized Unrealuzed gains and losses from available for sale Sirius and derivatives Pension losses Foreign currency |
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Discontinue operation |
Operating income of sales net of tax Operating income sale of assets net of tax . When company decided to discontinue. Decision date. When company is officially disposed is. Disposal date. And should be clearly distinguishing from normal operations |
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When using equity method |
Take investment and income and dividend is multiplied with your share In the business |
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Accounts recievables |
Direct write off method Recognize bad debts only when deemed irrecoverable. But it's not matched against revenues
Allowance method
The aowance is subtracted from AR to get nrv of AR
Bad debt is recognized on income statement but at time of sale not at the time. Of bad debts |
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Modified Accelerated Cost Recovery System(MACRS) By the IRS |
Creation of Deffered tax liability to which less tax is paid now and more later. For Financial reporting . Staright line Method For tax reporting sum of 3 years methods Under straight line tax comes up to 351 Under 3 yrs tax is 315 This deferred tax liability is 36 thus the difference will be paid later. |
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Impairment Test for asset |
PPE is carried at historic value - Depreciation but if book value cannot be recovered. It' is put down to fair value.
Step 1 If Sum of undicounted inflows is less than carrying value it is impaired. If not it's not impaired
Step 2 If impairment exists. Write it down to fair value or market value. |
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Effective tax rate |
Income tax for the period.( expense)/ Pretax Financial Income. |
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Negative Taxable income NOL |
It's known as NOL net operating loss Carry back carry forward - first 2 yr before taxable income can be absorbed for a refund if tax with the earliest years first.and carry forward for next 20 years to absorb tax liability in .The future. Carry forward Carry forward for next 20 years and no carry back |
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Average cost for periodic and perpetual |
Perpetual is called moving average method the table in book Periodic is called weighted average method Cost of goods available for sale (BI+P) /NO OF UNITS FOR SALE. To find a good cost Multiply avg cost with ending inventory to find value if ending inventory. To find cogs multiply avg cost with cogs units |
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Repurchase of own stock is a |
Financing activity |
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When dividend is paid in financing |
Present yr amount is taken |
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If loan attempted or successful in making long term again after the yr and before statements were issued |
Long term again |
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Sale and buy of avaliable for sale. Securities is a |
Investing activity |
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Goodwill value of impairment is tested at |
Reporting unit |
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When ar is written off with allowance methods |
No affect on income statement and balance sheet at write off time |
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Interest paid on loan and dividend revieved |
Mostly for operating activities but direct |
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Operating lease |
Like off balance sheet reporting |
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Installment method is used as |
Collectability and amount uncertainty is there and can't be assured |
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Cash recievables from issue of common stock |
Is financing |
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If overstated in 1 yr |
It has to be understated to counter balance |
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When %to. Completion remember |
Incurred cost +coat to. Complete should be added to get total cost of project |
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%of completion question |
Remember construction in progress contains real Costs and estimated profit for those costs
Billings is printed billings
Since cip and asset is more than billings (supposed to get) done work but no payment, it's an sweet and not liability |
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Us Gaap likes |
Indirect methods for cash flow |
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Error in end of period inventory |
Will cause error with everything in next period, the net income and cost of sales will be the opposite in the next yr and thus only retained earnings will be correct in next yr |
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Good will impairment has. Steps |
Qualitative assessment if chance that fair value has decreased and less than carry value Then Recoverability test which checks Impairment loss is recorded |
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Temporary difference |
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AR is recorded |
Net of allowance |
