Cost Method Par Method

Original Issue: Original Issue:

DR Cash DR Cash
CR Common Stock (par) CR Common Stock (par)
CR APIC CR APIC

Buy Back Shares: Treasury Stock Buy Back Shares: Treasury Stock
DR Treasury Stock (Cost) DR Treasury Stock (par)
CR Cash DR APIC - C/S (reverse from issue)
DR APIC - T/S (loss, if balance in T/S acc
Reissue Treasury Stock: DR Retained Earnings (loss)
DR Cash CR Cash
DR APIC - T/S (loss, if balance in T/S account) CR APIC - T/S (gain)
DR Retained Earnings (loss)
CR Treasury Stock (cost) Reissue Treasury Stock:
CR APIC - T/S (gain) DR Cash
CR Treasury Stock (par)
Retirement: CR APIC - C/S
DR Common Stock (par)
DR APIC - C/S (sell price - par) Retirement:
DR Retained Earnings (plug loss) DR Common Stock (par)
CR Treasury Stock (cost) CR Treasury Stock
CR APIC - T/S (plug gain)
 Par Method

R Common Stock (par)

Shares: Treasury Stock

Stock (par)
S (reverse from issue)
S (loss, if balance in T/S account)
d Earnings (loss)

R APIC - T/S (gain)

easury Stock:

R Treasury Stock (par)

R APIC - C/S

n Stock (par)
R Treasury Stock
 Long-term Construction Contract Revenue Recognition
Over Time Point in Time
MATCHING PRINCIPLE REVENUE REC PRINCIPLE
RECOGNIZE GROSS PROFIT DO NOT RECOGNIZE GP
HIGHER CIP ACCOUNT LOWER CIP ACCOUNT
Record Cost Incurred:
DR Construction in Progress (costs incurred that year)
CR Materials, Cash, Etc

Record Billings on Contract:

DR Accounts Receivable (Billings - Cash Collected, could be credit instead)
CR Progress Billings on Construction Contract

Record Payments Received:

DR Cash
CR Accounts Receivable

Record Estimated Gross Profit:

DR Construction Expense (cost incurred)
DR Construction in Progress (gross profit) Do NOT Recognize Gross Profit
CR Revenue from LT Contracts

Close Construction Accounts: Close Construction Accounts:

DR Progress Billings DR Progress Billings
CR Construction In Progress CR Revenue
DR Construction Expense
CR Construction in Progress

CURRENT ASSETS = CIP > PROGRESS BILLINGS

CURRENT LIABILITY = PROGRESS BILLINGS > CIP
enue Recognition
Point in Time
EC PRINCIPLE
COGNIZE GP
ACCOUNT

d be credit instead)

OT Recognize Gross Profit

truction Accounts:

R Revenue
ction Expense
R Construction in Progress
 PROFITABILITY
measures of success or failure for a period
Net Operating Margin Percentage Quick Ratio (Acid T
= EBIT / SALES = (CASH + EQUIVAL
Gross Profit Margin Current Ratio
= (NET SALES - COGS) / NET SALES = CURRENT ASSETS
Return on Assets (ROA) Cash Ratio
= NET INCOME / AVG TOTAL ASSETS = CASH + ST SECUR
Return on Equity (ROE) Accounts Receivab
= NET INCOME / AVG TOTAL EQUITY = NET SALES / AVG
Operating Cash Flow Ratio Inventory Turnove
= CASH FLOW FROM OPERATIONS / CURRENT LIABILITIES = COGS / AVG INVEN
Accounts Payable T
= COGS / AVG ACCO
Days Sales in Acco
= ENDING NET ACCO
Days in Inventory
= ENDING INVENTOR
Days of Payables O
= ENDING ACCOUNT
Cash Conversion C
= DAYS SALES IN AR
 LIQUIDITY
measure ST ability to pay maturing obligations
Quick Ratio (Acid Test)
= (CASH + EQUIVALENTS + ST SECURITIES + NET RECEIVABLES) / CURRENT LIABILITIES
urrent Ratio
= CURRENT ASSETS / CURRENT LIABILITIES
ash Ratio
= CASH + ST SECURITIES / CURRENT LIABILITIES
Accounts Receivable Turnover
= NET SALES / AVG NET ACCOUNTS RECEIVABLE
nventory Turnover
= COGS / AVG INVENTORY
Accounts Payable Turnover
= COGS / AVG ACCOUNTS PAYABLE
Days Sales in Accounts Receivable
= ENDING NET ACCOUNTS RECEIVABLE / (NET SALES / 365)
Days in Inventory
= ENDING INVENTORY / (COGS / 365)
Days of Payables Outstanding
= ENDING ACCOUNTS PAYABLE / (COGS / 365)
ash Conversion Cycle (Net Operating Cycle)
= DAYS SALES IN AR + DAYS IN INVENTORY - DAYS OF PAYABLES OUTSTANDING
 SOLVENCY
measure protection for LT creditors/investors
Debt-to-Equity EBITDA
= TOTAL LIABILITIES / TOTAL EQUITY = NET INCOME + INCOME TAX +
Total Debt Earnings Per Share
= TOTAL LIABILITIES / TOTAL ASSETS = INCOME AVAILABLE TO COMMO
Equity Multiplier (Degree of Operating Leverage) Price to Earnings Ratio
= TOTAL ASSETS / TOTAL EQUITY = PRICE PER SHARE / BASIC EARN
Times Interest Earned Dividend Payout
= EBIT / INTEREST EXPENSE = CASH DIVIDENDS / NET INCOME
 PERFORMANCE METRICS
evaluate operating performance

OME + INCOME TAX + INTEREST + DEPRECIATION + AMORTIZATION

er Share
AVAILABLE TO COMMON SHAREHOLDERS / WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
rnings Ratio
R SHARE / BASIC EARNINGS PER SHARE

VIDENDS / NET INCOME

 PERFORMANCE METRICS
evaluate operating performance

OME TAX + INTEREST + DEPRECIATION + AMORTIZATION

TO COMMON SHAREHOLDERS / WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

BASIC EARNINGS PER SHARE

NET INCOME
 BONDS
Bonds Selling Price:
= PV of future principal payment (lump sum)
+ PV of future interest payments (face * coupon, PV of ordinary annuity)
ALWAYS USE MARKET RATE TO DETERMINE PV FACTORS
Cash Payment = Face Value * Coupon Rate
Interest Expense = Carrying Value * Market Rate
DISCOUNT = Market Rate HIGHER than Coupon Rate
Higher Interest Expense than Coupon Paid
Unamortized Discount = Face Value - Selling Price
Amortization of Discount = interest expense - coupon payment
AMORTIZATION INCREASES CARRYING VALUE
Bond Issuance:
DR Cash
DR Discount on Bond Payable
CR Bond Payable
Discount Amortization:
DR Bond Interest Expense
CR Discount on Bond Payable
CR Cash
PREMIUM = Market Rate LOWER than Coupon Rate
Lower Interest Expense than Coupon Paid
Unamortized Premium = Selling Price - Face Value
Amortization of Premium =coupon payment - interest expense
AMORTIZATION DECREASES CARRYING VALUE
Bond Issuance:
DR Cash
CR Premium of Bond Payable
CR Bond Payable
Premium Amortization:
DR Bond Interest Expense
DR Premium on Bond Payable
CR Cash
Bond Issuance Costs = DEDUCTED from CV + AMORTIZED
 BONDS

(lump sum)
(face * coupon, PV of ordinary annuity)
O DETERMINE PV FACTORS
Coupon Rate
alue * Market Rate
et Rate HIGHER than Coupon Rate

ue - Selling Price
st expense - coupon payment
ARRYING VALUE

t Rate LOWER than Coupon Rate

rice - Face Value

n payment - interest expense
ARRYING VALUE

TED from CV + AMORTIZED

 FINANCE LEASE
OWNES Critera = Finance Lease
PV of Lease Payments:
= Payment (Annuity Due)
+ Purchase Option/Guaranteed Residual (PV of $1)
Interest Expense = Carrying Value * Effective Rate
Amortization = ROU Asset / Term (STRAIGHT-LINE)
Lease (Coupon) Payment - Interest Expense = Reduction in CV
Commencement Date (lease starts):
DR Right-of-use Asset (ROU)
CR Lease Liability (PV of all Payments)
Annual Journal Entry:
DR Interest Expense (CV * effective rate)
DR Lease Liability (reduction in principal)
CR Cash (annual payment)
Amortization:
DR Amortization Expense
CR Accumulated Amortization
Cash Flows:
Principal Payment = Outflow from Financing
Interest Payment = Outflow from Operating
AMORTIZATION TERM:
Ownership or Written Option = asset useful life
Otherwise = shorter of lease term or asset useful life
 FINANCE LEASE OPERATING LEASE
ES Critera = Finance Lease If Finance Critera Not Met = Operati
PV of Lease Payments:
= Payment (Annuity Due)
esidual (PV of $1) + Purchase Option/Guaranteed Residual (PV of $1)
alue * Effective Rate Lease Expense = Annual Payment
erm (STRAIGHT-LINE) Amortization = PLUG (lease expense - interest e
erest Expense = Reduction in CV Lease Expense - Interest Expense = Reduction i
Commencement Date (lease starts):
DR Right-of-use Asset (ROU)
of all Payments) CR Lease Liability (PV of all Payments)
Annual Journal Entry:
DR Lease Expense (annual payment)
DR Lease Liability (reduction in principal)
CR Cash (annual payment)
CR Accumulated Amortization (reduction in
Cash Flows:
Principal Payment = Outflow from Operations
Interest Payment = Outflow from Operations
Financing
Operating

set useful life

m or asset useful life
PERATING LEASE OWNES CRITERIA
Not Met = Operating Classification Ownership of asset transers to lessee by end of term
Written Option ot purchase asset (REASONABLY CERTA
Net Present Value of lease payments > 90% of asset
esidual (PV of $1) Economic Life - Lease term > 75% remaining life of as
Specialized Asset - no alternative use at end of lease
xpense - interest expense)
nse = Reduction in CV

of all Payments)

tization (reduction in principal)

Operations
Operations
ES CRITERIA
essee by end of term
t (REASONABLY CERTAIN)
ments > 90% of asset fair value
5% remaining life of asset
e use at end of lease term
 EXPECTED CREDIT LOSSES
HTM AFS
Amortized Cost > PV = Impairment Loss FV > Amortized Cost = Unrea
DR Credit Loss DR Valuation Account
CR Allowance for Credit Losses
Amortized Cost > FV = Impai
Expected Credit Loss = Amor
Impaired Amount < Expected
DR Credit Loss (Impaired Amoun

Impaired Amount > Expected

DR Credit Loss (Impaired Amoun

DR Unrealized Loss (Impaired - C

REDIT LOSSES
AFS
V > Amortized Cost = Unrealized Gain (OCI)
DR Valuation Account
CR Unrealized Gain (OCI)
Amortized Cost > FV = Impaired Amount
xpected Credit Loss = Amortized Cost - PV
mpaired Amount < Expected Credit Loss:
DR Credit Loss (Impaired Amount, IS)
CR Allowance for Credit Loss (BS)
mpaired Amount > Expected Credit Loss:
DR Credit Loss (Impaired Amount, IS)
CR Allowance for Credit Loss (BS)
DR Unrealized Loss (Impaired - Credit Loss)
CR Valuation Account
 SALE OF FIXED ASSETS
Elimate Gain on Sale:
DR Gain on Sale (Selling Price - Carrying Value)
CR Equipment (Sell Price - Original)
CR Accumulated Depreciation (Adjustment to get to what it should be)
CR Depreciation Expense (Difference in New vs Old Annually)
Eliminate Excess Depreciation:
DR Accumulated Depreciation
CR Depreciation Expense (Difference in New vs Old Annually)
 SALE OF FIXED ASSETS Eliminate Intercompany
DR Intercompany Sales
g Price - Carrying Value) CR Intercompany COGS
nt (Sell Price - Original) CR COGS (Profit * % Sold)
ated Depreciation (Adjustment to get to what it should be) CR Inventory (Profit * Invent
ation Expense (Difference in New vs Old Annually)
preciation: Bond Elimination
DR Bond Payable - Retire
ation Expense (Difference in New vs Old Annually) DR Premium on BP
CR Investment in Bonds
CR Gain on Extinguishment
Eliminate Intercompany Profit
mpany Sales
R Intercompany COGS
R COGS (Profit * % Sold)
R Inventory (Profit * Inventory Remaining)

Bond Elimination
yable - Retire

R Investment in Bonds
R Gain on Extinguishment
 Deferred Tax Liability Deferr
FUTURE TAXABLE AMOUNTS FUTURE DEDUCTIBLE AMOU
TAX DEDUCT NOW PAY MORE TAX NOW
LOWER TAXABLE INCOME HIGHER TAXABLE INCOME
HIGHER FINANCIAL INCOME LOWER FINANCIAL INCOME
Examples: Examples:
Installment Sales Prepaid Interest
Contractor's Accounting Prepaid Royalties
Equity Method (Undistributed Dividends) Bad Debt Expense
Accelerated Depreciation Expense Warranty/Estimated Liabilit
Amortization of Franchise Start-up Expenses
Prepaid Expense
Journal Entry: Journal Entry:
DR Income Tax Expense - Current (Taxable Income) DR Income Tax Expense - C
DR Income Tax - Deferred (DTL) DR Deferred Tax Asset
CR Deferred Tax Liability
CR Income Tax Payable
Reversal of DTL: Reversal of DTA:
DR Deferred Tax Liability DR Income Tax Benefit - De
CR Income Tax Benefit - Deferred
Journal Entry: With Valua
DR Income Tax Expense - C
DR Deferred Tax Asset
No Valuation Account

ALWAYS REPORTED NONCURRENT

INCOME TAX EXPENSE = PRETAX INCOME * TAX RAT
INCOME TAX PAYABLE = TAXABLE INCOME * TAX RAT
EFFECTIVE TAX RATE = TAX EXPENSE / PRETAX INCOM
 Deferred Tax Asset
UTURE DEDUCTIBLE AMOUNTS
AY MORE TAX NOW
IGHER TAXABLE INCOME
OWER FINANCIAL INCOME
xamples:
repaid Interest
repaid Royalties
ad Debt Expense
Warranty/Estimated Liabilities
tart-up Expenses

ournal Entry:
DR Income Tax Expense - Current (Taxable Income)
DR Deferred Tax Asset
CR Income Tax Benefit - Deferred (DTA)
CR Income Tax Payable
Reversal of DTA:
DR Income Tax Benefit - Deferred
CR Deferred Tax Asset
ournal Entry: With Valuation Account
DR Income Tax Expense - Current (Taxable Income)
DR Deferred Tax Asset
CR Income Tax Benefit - Deferred (Realized DTA)
CR Income Tax Payable
CR Deferred Tax Evaluation Allowance
D NONCURRENT
ETAX INCOME * TAX RATE
ABLE INCOME * TAX RATE
XPENSE / PRETAX INCOME
 Pledge Receivable JEs
Good Faith Deposit:
DR Cash
CR Refundable Advance

Satisaction of Condition:
DR Refundable Advance
DR Pledge Receivable - With Donor Restrictions
CR Revenue - With Donor Restrictions

Collection of Receivable:
DR Cash - With Donor Restrictions
CR Pledge Receivable - With Donor Restrictions

Satisfaction of Use Restrictions: Reclassify

DR Satisfaction of Use Restriction
CR Cash - With Donor Restrictions

DR Cash - Without Donor Restrictions

CR Satisfaction of Use Restriction

Cash Expenditures:
DR Construction in Progress
CR Cash - Without Donor Restrictions
 VARIANCE POWER
WITHOUT WITH
R - Refundable Liability (4) R - Contribution (1)
UNAFFILIATED
B - Contribution (2) B - Nothing
R - Contribution (1) R - Contribution (1)
FIN RELATED
B - Change in Net Assets (3) B - Nothing
1 DR Assets (Fair Value)
CR Contribution

2 DR Receivable (Financial) or Beneficial Interest (Non-Financial)

CR Contribution

3 DR Interest in Recipient Net Assets

CR Change in interest in recipient net assets

4 DR Asset (Fair Value)

CR Refundable Advance Liability
 GOVERNMENTAL
CURRENT FINANCIAL RESOURCES MANAGEMENT FOCUS
ONLY CURRENT ASSETS AND LIABILITIES
BUDGETARY FINANCIAL POSITION FOCUS
ACCOUNTS FOR TAX-SUPPORT ACTIVITIES
MODIFIED ACCRUAL BASIS OF ACCOUNTING
INCLUDED FUNDS: GRaSPP
General Fund - account for ordinary operations
Special Revenue - account for revenues (restricted to finance activities)
Debt Service -account for payment of interest and principal on debt
Capital Projects - used for acquisition of major capital assets
Permanent Fund - support governmental programs with income (NOT PRINCIPAL)
RNMENTAL PROPRIE
GEMENT FOCUS ECONOMIC RESOURCES MANAGEMENT FOCUS
ALL ASSETS AND LIABILITIES
INCOME DETERMINATION FOCUS
ACCOUNTS FOR BUSINESS-TYPE ACTIVITIES
FULL ACCRUAL BASIS OF ACCOUNTING
INCLUDED FUNDS: SE
Internal Service - account for goods and services provided
(restricted to finance activities) Enterprise Fund - account for external customers for acqu
terest and principal on debt
major capital assets FIDUCI
l programs with income (NOT PRINCIPAL) ECONOMIC RESOURCES MANAGEMENT FOCUS
ALL ASSETS AND LIABILITIES
INCOME DETERMINATION FOCUS
ACCOUNTS FOR GOVERNMENTAL CONTROLLED TRUSTS
FULL ACCRUAL BASIS OF ACCOUNTING
INCLUDED FUNDS: CIPPOE
Custodial Fund - account for resources in temporary cust
Investment Trust - account for external investment pools
Private Purpose - account for activities that provide benefit
Pension (Employee) Fund - account for resources of define
 PROPRIETARY
AGEMENT FOCUS

YPE ACTIVITIES
COUNTING

r goods and services provided by departments

or external customers for acquisition and operation of gov facilities and services

FIDUCIARY
AGEMENT FOCUS

NTAL CONTROLLED TRUSTS

COUNTING

r resources in temporary custoday of gov unit (catch all)

for external investment pools
r activities that provide benefits to recipients (not pension or investment funds)
account for resources of defined benefit plans and other retirement plans