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This course will explain financial accounting from a new angle so that you have some of the background necessary for intermediate courses in financial reporting, analysis, and modeling. The course presents a framework for analysis and provides spreadsheets to implement the framework.


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Exams and Grading


There will be five class sessions of three hours each. The last session will be the final exam.

Class Topic
  • Accounting terms, transactions, and systems
  • The logic of the double-entry bookkeeping systems
  • How the separation of duties is used to reduce fraud
  • Performance measures: Cash flows versus income flows
    • Accrued revenues or receivables
    • Deferred revenues or advances
    • Accrued expenses or payables
    • Deferred expenses or prepayments
  • Design of incentive systems
  • The core set of business transactions and how they affect the following statements:
    • Balance sheets
    • Income statements
    • Indirect cash flow statements
    • Direct cash flow statements
  • Costs versus expenses versus payments
  • Period costs versus inventoriable costs versus separately capitalized costs
  • Inventories: Raw materials, work in process, and finished goods
  • Cost flow assumptions: LIFO versus FIFO
  • Property, plant, and equipment: Gross PP&E, Accumulated depreciation, and Net PP&E
  • Which costs are capitalized
  • Useful life versus economic life versus physical life; Salvage values; Depreciation patterns
  • How depreciation of manufacturing equipment is inventoried
  • Gains and losses on the sale of PP&E
  • PP&E impairments