Financial Accounting Exam Study Guide
Creating a comprehensive study guide for Financial Accounting involves breaking down key
concepts, formulas, and processes into manageable sections. Here’s a structured guide to help
you prepare for your exam:
Financial Accounting Exam Study Guide
1. Introduction to Financial Accounting
Purpose: Understand the role of financial accounting in business, including the preparation of
financial statements.
Principles:
o Accrual Accounting: Recognize revenues and expenses when they occur, not when cash
changes hands.
o Conservatism: Be cautious in reporting profits and assets.
o Consistency: Use the same accounting methods from period to period.
2. Financial Statements
Income Statement: Shows a company's revenues and expenses over a period.
o Formula: Net Income = Revenues - Expenses
Balance Sheet: Displays a company’s financial position at a specific point in time.
o Formula: Assets = Liabilities + Equity
Statement of Cash Flows: Tracks cash inflows and outflows categorized by operating, investing,
and financing activities.
Statement of Changes in Equity: Shows changes in owner's equity over a period.
3. Accounting Cycle
1. Transaction Analysis: Identify and analyze the impact of transactions.
2. Journal Entries: Record transactions in the journal.
3. Posting: Transfer journal entries to the ledger.
4. Trial Balance: Ensure debits equal credits.
5. Adjusting Entries: Make adjustments for accruals and deferrals.
6. Adjusted Trial Balance: Prepare after adjustments.
7. Financial Statements: Prepare income statement, balance sheet, and cash flow statement.
8. Closing Entries: Close temporary accounts to retained earnings.
9. Post-Closing Trial Balance: Ensure all temporary accounts are closed.
4. Key Concepts and Formulas
Revenue Recognition Principle: Revenue is recognized when earned, regardless of when cash is
received.
Creating a comprehensive study guide for Financial Accounting involves breaking down key
concepts, formulas, and processes into manageable sections. Here’s a structured guide to help
you prepare for your exam:
Financial Accounting Exam Study Guide
1. Introduction to Financial Accounting
Purpose: Understand the role of financial accounting in business, including the preparation of
financial statements.
Principles:
o Accrual Accounting: Recognize revenues and expenses when they occur, not when cash
changes hands.
o Conservatism: Be cautious in reporting profits and assets.
o Consistency: Use the same accounting methods from period to period.
2. Financial Statements
Income Statement: Shows a company's revenues and expenses over a period.
o Formula: Net Income = Revenues - Expenses
Balance Sheet: Displays a company’s financial position at a specific point in time.
o Formula: Assets = Liabilities + Equity
Statement of Cash Flows: Tracks cash inflows and outflows categorized by operating, investing,
and financing activities.
Statement of Changes in Equity: Shows changes in owner's equity over a period.
3. Accounting Cycle
1. Transaction Analysis: Identify and analyze the impact of transactions.
2. Journal Entries: Record transactions in the journal.
3. Posting: Transfer journal entries to the ledger.
4. Trial Balance: Ensure debits equal credits.
5. Adjusting Entries: Make adjustments for accruals and deferrals.
6. Adjusted Trial Balance: Prepare after adjustments.
7. Financial Statements: Prepare income statement, balance sheet, and cash flow statement.
8. Closing Entries: Close temporary accounts to retained earnings.
9. Post-Closing Trial Balance: Ensure all temporary accounts are closed.
4. Key Concepts and Formulas
Revenue Recognition Principle: Revenue is recognized when earned, regardless of when cash is
received.
