Basic Concepts of Financial Accounting for CPA Exam - Online Syllabus Topics for Financial Accounting Course

Operating Expenses Ratio

Definition and Explanation: Operating expenses ratio shows operating expenses as a percentage of sales. Operating expenses relate to the operations of a business entity. In other…
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Inventory Valuation Methods

Records of inventories are not normally included in the double entry system. Most organizations keep a separate record of inventories, outside the ledger, by maintaining…
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Items in the Balance Sheet

Balance sheet is a financial statement so it should give much information as possible to the users of the balance sheet. The items in the…
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Drawings

Drawings in Accounting – Definition and Explanation: Drawings are the amounts taken by the owner of a business for his personal use in anticipation of…
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Accounting Period

What is an Accounting Period/Reporting Period?  Definition and Explanation: Accounting period (reporting period) is that period for which the organization ascertains its profit or loss. It…
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Closing of Incomes and Expenses

As mentioned in the accounting for inventories chapter, businesses close the accounts for all its incomes and expenses by transferring their balances to incomes statement…
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Calculation of Net Profit

Definition and Procedure to Explain Net Profit: We have already learnt in the accounting for inventories chapter that how profits and losses may be determined…
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Net Profit Ratio

Net Profit Ratio or Net Profit Margin or Operating Profit Ratio – Definition and Explanation: The net profit ratio (net profit margin or operating profit)…
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Gross Profit Ratio

Gross Profit (GP) Ratio or Gross Profit Margin – Definition and Explanation: Gross profit ratio (GP ratio or gross profit margin) tells us how much…
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Profitability Ratios

Profit is as essential for a business as blood for life of a human being. A business running in continuous losses finds it dubious to…
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Bookkeeping for Incomes and Expenses

The mechanism of recording incomes and expenses transactions/entries are given below: Explanation with Example Entries and T-Accounts: Transaction 1: Capital Injection by Owner: Transaction 2:…
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Incomes and Expenses

Definition of Income: The most important and possibly the only source of revenue for most businesses is the income derived from the sale of goods…
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Opening Inventory

Definition: Businesses may inventory of unsold goods at the beginning of the period called opening inventory. Normally, an assumption is made that this inventory is…
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Closing Inventory

Definition: This is very unlikely that a business sells all the goods that it purchased during the current period. Therefor cost of purchases is not…
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Closing of Incomes and Expenses

At the end of an accounting period businesses close  the nominal accounts (accounts for all incomes and expenses) by transferring their balances to the income…
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Inventory of Goods

Inventory of goods, for trading businesses, holds a key place in accounting analysis as it is mainly responsible for generating profits which is one of…
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Trial Balance

Definition: As the business grows, the number of entries increases and it is therefore rightly desired by the businesses to carry out periodic checks on…
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Balancing of an Account

Definition of Balance, Debit Balance and Credit Balance: The difference between the sum of the two sides of an account is called the balance. This…
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Accounts in Accounting

Definition: Instead of using a plus or minus sign to indicate increase or decrease of an item, an account is prepared to show summarized record…
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Rules for Debit and Credit

Accounting as language of business has its own vocabulary. There are certain rules for recording increase or decrease in assets, liabilities and capital in the…
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Balance Sheet

Balance Sheet or Statement of Financial Position – Definition: The balance sheet (statement of financial position) is a statement (not an account) which shows financial…
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Business Transaction

We should know that accounting equation is only affected when business enters into a transaction. The term transaction is defined below: Definition: Business transaction is…
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Accounting Equation

The whole system of accounting has developed from the same basic tenet of a single equation. As a business does not own any thing at…
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Branches of Accounting

There are following three main branches of accounting: (1) Bookkeeping. (2) Financial accounting. (3) Managerial accounting. Definition and Evolution of Bookkeeping: Firstly accounting is related…
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Explains financial and managerial accounting. Exercises, problems, calculators and more.

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