CPA FAR Exam-Cash Basis to Accrual-PART 1-By Darius Clark
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- เผยแพร่เมื่อ 16 ก.ย. 2024
- The CPA Financial Accounting and Reporting Exam-(FAR) requires a candidate to understand how to reconcile from cash basis to accrual basis. In this video, we start with cash basis revenue and try to calculate revenue earned or accrual basis revenue. This type of question is very common in multiple choice and task based simulation when you meet the AICPA at the Prometric Testing Center. When NASBA gives you your notice to schedule, make sure to check out the AICPA blueprint for all the current FAR topics. If you like this video, be sure to comment and I will possibly make a follow up video and show you how to reconcile from cash basis to accrual basis expenses and then from cash basis to accrual basis net income. Other FAR topics that you should review accounts and notes receivable, bad debt expense and discounting a note. Revenue recognition topics are tested in FAR and include variable consideration, input and output methods, incremental costs, principal and agent, consignment, bill and hold, warranties, re-purchase agreements, sale with right of return, refund liabilities, contract modifications, gift cards, franchise and royalty revenue, and long term construction contracts. Adjusting entries for accrued interest revenue involve both the income statement and balance sheet and the exam could ask for the impact on the financial statements, working capital, stockholders equity etc, if these entries are not made. Other FAR topics to review before your test include capitalization of interest on fixed assets, depreciation, and accounting changes. Be sure to know the difference between a change in principle and a change in accounting estimate. The concept of retrospective application and prospective treatment is often tested in simulation and multiple choice questions. Know how to test for impairment of both goodwill and assets with a finite life. Patents for example are often tested for impairment on the CPA exam. Know the difference between land and land improvements. For leases, be sure to know the criteria for a finance lease and how the right of use of asset and lease liability are impacted when there is an immediate payment (annuity due) and a first payment one year from lease inception. Know the difference between accounting for operating leases and finance leases for both the lessee and lessor. This accounting homework is very important if you want to pass the CPA FAR exam. Other FAR topics that are heavily tested include the statement of cash flows both direct and indirect methods. Adjusting entries that require reconciliation of cash basis to accrual basis are a "must know". Bonds is another big FAR topic and be sure to know when interest expense is higher than cash paid to the bondholders and when cash paid to the bond holders is higher than interest expense. This has to do with whether the bonds are sold at a discount vs sold at a premium. Stockholders equity is a topic that often gets overlooked because its not considered difficult. Recording treasury stock for example has two methods, the cost method and the par value method. Retirement of treasury stock is a popular question on the CPA Exam. Inter-company eliminations for consolidated financial statements is also heavily tested in FAR resulting from business combinations. Hedging and derivatives is worth a look before your Prometric visit. Knowing what goes to other comprehensive income and what is reported on the income statement is often tested. Be sure to know the difference between re-measurement and translation methods of converting financial statements in a foreign currency. With GASB, know the difference between modified accrual and full accrual accounting. Know the difference between Fund Level Financial reporting and government wide financial reporting especially with regard to assets and liabilities. Know when the term "expenditure" is used and when the term "expense" is used. Non-monetary exchanges are tested in FAR and you need to know how to handle the gains and losses. Pensions are a topic that sometimes candidates find difficult. Knowing how to calculate the total income statement impact and the asset and liability to be reported on the balance sheet. Deferred taxes is another big topic, knowing the difference between a deferred tax asset and deferred tax liability and how and when it reverses.
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I've been studying this topic for days... but all you had to say was "when was it collected, when was it earned" and now I get it. Thank you so much for this video. I will definitely be watching part 2.
Collected when, earned when is all I needed to get it. Sigh of relief I'm not the only one who couldn't understand the topic. 😅
$65,600! and yesss a second video. I want to thank you Darius..I spent 3 hours trying to understand Tim G lecture last night and I couldn't get anything right. In 17 minutes you changed my day! You are amazing!!! I will recommend your website to all my friends!
Same here...spending lots of time trying to figure out Tim G & Peter O review material. Some of the MCQs are asking something not reviewed in the modules. It's very frustrating, and they have too many Qs in some modules...like 57 Qs for 1 module...ridiculous imho!
Hey think you can help a brother? How'd you arrive at that amount?
Becker and Tim G. are absolute trash on this subject.
Who is Tim G if I may ask?
@@aallearn4927 Tim Gearty from Becker. His explanations are not good for this particular section.
omg. thank you so much. i was literally dying trying to do the becker MCQ's b/c i couldn't understand the logic behind the formula. THANK YOU!!!!!!!!!!!!!!!!
Dude! this makes more sense than anything else I've seen!
after listening for 36 seconds, I have no doubt you have a lot to impact on whoever cares to listen.
This was sooooooooo good. The way you explain this brought life to my brain. Thank you.
I love how you repeat the concept multiple times in different scenarios, SUPER helpful
Thank You for noticing the i75 Difference!
I think it’s A. Subtract or add the things below from cash
Subtract Year 1 Rent Receivables since it was earned last year.
Add Year 2 rent receivables since it was earned this year.
Add year one unearned rent since we’ve earned it since then.
Finally subtract year 2 unearned rent since it hasn’t been earned yet.
65,600
I literally yelled YES out loud when you suggested part 2 for cash to Accrual expenses!
Huge thank you!!
Thanks Keri, Now you can see Part 2, right here,
th-cam.com/video/fiKVwsKjk-c/w-d-xo.html
I danced!
Thank you. The explanation is way more clear than my study material. Greatly appreciated.
A. 65,600
Thank you for the video! This is such a great help for my upcoming departmentals
This is the best explanation I have EVER seen! I now have clarity. Thank you so much!
thank you man I was struggling with this big time
Sooo helpful!! Really made things click for me on a topic I was really struggling with! You make explanations so simple.
Girl... girl... this guy Darius just made sense of this cash to accrual conversion!
You are the best Darius. Your explanation makes so much sense and very easy to understand. I can literally follow what you are saying. No memorization. Thanks for your videos.
Thank you! Life saver
this is the best explanation on cash to accrual. Everyone else is just focusing on formulae
65600
brilliant explanation, thanks a lot Darius.
this video is goated, thank you so much!!
You are the man....I could not figure this out with my CPA software and you fix this issue in 17mins. Thank you
Thanks Darius , I understand this concept rather than memorize the formula which is useless , thanks Again
Ok no joke.... its ridiculous the way becker explains things to them throw you mcq that have nothing to do.... you are learning alone.. im not gonna lie.. had to see the video 3 times to finally get it and wow... now i feel stupid cause its so easy when you finally UNDERSTAND... please do share a venmo or some other sort of app because you deserve all the credit. From the bottom of my heart. THANK YOU!!
65,600 Wow!! I'm impressed! i was able to solve this problem in no time. thank yo so very much.
Really great video, thank you. I have been getting some low scores on these MCQ's on Uworld!
u deserve an award
$65,600 Thank you for the clarity! Moving on to Part 2
This was more than helpful! Thanks a lot. I finally know how to solve these problems now. :)
$65,600 Thanks very much for making this so easy to comprehend!!
I've been on team Wiley for a while, and they replaced the lecture that had the formula version for accruals (delta cash = delta liabilities - delta other assets) and now go with this thought process version. This way is just way better.
This video is a lifesaver. Thank you, Darius!
Great video! Definitely waiting for part two! $65,600 is the answer.
$65600. Only with understanding, no cramming. You're the best. :)
Thank you!!!! I've tried everything to understand this but I didn't until I watched your video!
Thanks. Much effort and energy go into each i75 Video but its all worthwhile when you notice the i75 Difference!
such good teacher, I love it. finally understand
THANK YOU, you are blessed, I was not getting this at all until I found your video. I agree with Melissa as well, this brought life to my brain. I am so thankful, wow I now know I can do this!😁😄😃😀
Best explanation hands down. 👏🏾👏🏾👏🏾
“That would be like Enron accounting” lmao
Thank you so much! I had so many ah-ha moments throughout this video. Thanks again!
The 7600 and 26000 were earned LAST year but have to be subtracted from this year earnings which will be collected next year you start at 60,000 then add the difference
So 65600
65,600. I just subtracted year 1 from year 2 and added the difference to the 60,000 Rent Cash received in his hands.
Thanks for this very informative content! Helps a lot!
English is not my native language, I was confused when I got through this topic in becker, Thx Alot You made it easy for me
Thanks Darius. Trying to memorize formulas stinks. This video helped me understand the full concepts! 👍🏽
GENIUS!❤
Such a great explanation!!!! Thank you
$65,600. +$600 for the increase in A/R + $5,000 for the decrease in unearned revenue (meaning $5,000 was earned revenue)
I struggles the whole time last night trying to do this and I CANT believe i finally understand this. Was literally getting every question wrong that ask these question and didn't understand why even with their explanation?
$65,600! Thank you for clarifying such a confusing concept. :)
thank you so much!!! I finally get to understand it.. I remember when this was first discussed in our class, I got so confused and just rely on memorizing the formula. Eventually, whenever I'm encountering complicated problems, I can't follow the formula because I did not understand it fully. Thank you really coz I understand the concept now than before ❤️
I think the additional videos mentioned at the end would be beneficial.
Nice explanation ❤
Your explanation was very helpful!! Was going by the formula and was getting so confused. I was able to answer the last question in like 30 secs after watching
Time stamp for video 5:37
I understand the concept and I can get the right answers based on the explanation you provided of “when was it earned vs. when was it collected.” However I’m still having trouble with the 5,000 beg. AR. Since we are going from cash to accrual this means that under cash we record revenue when we receive cash. If we earned the 5,000 of revenue in the previous year but didn’t receive cash then that revenue would have never hit our income statement for year 1 because we didn’t record
Cash 5,000
Revenue. 5,000
So why would we subtract the 5,000 of revenue from the 10,000 of cash collected? I get the 5,000 of revenue was earned in yr.1 but we never made the JE to recognize the revenue in yr.1 so if we counted the 5,000 of revenue in yr.2 we wouldn’t be “double counting” it because we never recognized it in year 1?
Sorry I know I’m making this confusing but I just don’t know how we would be double counting it since we never recognized the 5,000 of revenue in year 1?
wow this is the best explanation to understanding cash basis to accrual! Collected when? Earned when??
Excellent explanation..Thank you so much..I can now understand this concept easily after watching this video. Please keep making videos on CPA concepts.
A. $65,600. Please make part 2 if you haven't already! Thanks for your help!
Thank you so much. Your explanations make so much sense.
Super helpful, your method of explaining was easier to follow.
THANK YOU!
Simply amazing
Please make part 2,3 for expenses and COGS request
This helps a lot!! Thank you!!
This was so helpful, thank you!
You're so welcome!
A is the answer. Yes I would like a second video.
I enjoy your videos sooo much
Hi Darius, I wanted to know if you made the video for cash to accrual basis net income or not? I watched part 1 and part 2 for revenues and expenses and the videos are BEYOND helpful. Thank you so much for making them for us and please let me know if you have made it for net income or not because I can't seem to find it. Thanks
I-75 FAR Chapter 2 Video # 7!
@@DariusClarki75 Thank you!
Q1. Revenue = Sales
Total sales = cash sales + credit sales
Cash sales = 25k
Credit sales = closing AR - Beginning AR(because the difference between this is the revenue earned in the year through credit sales as ending is more than beginning)
Credit sales = 8 - 3 = 5k
Total revenue = 25k + 5k =30k
Let me know if this method is incorrect.
For the question at 10:30, Under the cash basis, revenue is recognized when cash is received, so wouldn't unearned revenue be revenue we earned but haven't collect cash for yet? Thus, we need to add it to the $400,000 of cash, for technically we did earn it, we just haven't collect the cash yet?
Omg! Thank you!!!
my answer is $65600 is under accrual basis revenue.
Hi Sir, I need video for revenue recognition, contingencies & long term construction contracts
it's a, thank u
Very helpful! Thanks! I have a question. What would be the effect in Account Receivable when Allowance for Doubtful Account is present in a problem?
65600, thanks a ton
Helpful!
THANK YOUUU SIRRR!
Becker is the one that has that dumb formula and has me confused as well because it doesn't work. I've been stuck in special purpose frameworks for three weeks now and still stuck. I emailed Becker about it and surprise surprise they didn't reply to my email.
65,600 yes to the second video
is it 65600? pls make a part two. Thanku.
Yes, $65,600 is correct, Part 2 is in the works!
$64,400 ?? if my answer is true I am going to be So Happy :) and optimistic also. as I am at the begging of CPA journey :)
the answer is $65,600?
Is this a legit question I would see? The ones in my study course seem more difficult
The answer of the last question is $65,600
65,600
A = $65,600
Can someone explain how you get 65,600?
For me, using journal entries helps me solve questions like these quickly. So this is how I got the answer:
Debit Receivable for $600 (the increase from Year 1 to Year 2)
Debit Unearned Revenue for $5,000 (the decrease from Year 1 to Year 2)
Debit Cash for $60,000 (the amount received in Year 2)
Credit Revenue for $600 + $5,000 + $60,000 = $65,600
Hope this helps.
Start with cash collected of $60,000, beginning receivable was earned last year, collected this year subtract $7,600. Ending receivable was earned this year, collected next year, add the $8,200. At this point accrual basis revenue is $60,600. Now we move on to unearned revenue. Beginning balance of $26,000 was collected last year, earned this year, add $26,000. Ending unearned revenue was collected this year, earned next year, subtract $21,000. Add the $5,000 decrease in unearned revenue and a total of $65,600 was earned this year.
How can I get more information about your Cpa review course lectures please? Thanks
Go to CPAexamTutoring.com check out the website and email me from there if you have any questions!
@@DariusClarki75 am I sending an email to “support”? because that’s the only email like I find there. I have a question I need to ask please. Thanks
The email address is at the top left corner of the website.
410,000
I think the answer is $65,600
$65,600
so wheres the answerr
A
The answer is $65,600
65600
$65,600..
a. $65,600
Yes, $65,600 is correct! Look for "Part 2" today or tomorrow!
A！
$65600
65,600