Assets=Liabilities+(Share capital+Beg Last entry: Dec 31, 2023 Dr Cash (A) $40 million Expense/ECL XX Cr AR – name XX recovery of bad
Cr AR – name XX recovery of bad Ending inventory: no. left x average cost per unit
RE+Revenues-Expenses+Gains-Losses-Dividend)
Asset: e.g.Cash,marketable securities,accounts
receivable, note receivable,inventory,prepaid
expenses,PPE,Land,Intangibles like goodwill
Non current asset: PPE- AD
Liabilities:E,g,accounts payable,accrued liabilities
like wages payable interest payable, unearned
revenue non current liabilities: long term debt
Equity: e.g.Share cap, retained earnings
(revenue/expense),Dividend, Reserves(currency
translation reserve, asset revaluation reserve)
Income->inc. assets/ decr. Liabilities, Inc. equity,
during accounting period other than from owner cont
Expense->dec.assets/inc.liability,dec. Equity, during
accounting period other than distribution to owners
Note=must have an exchange of goods or service*
Statement of financial position=point in time(At Dece
Statement of anyth else=over period of time(for the
year ended december 31,2020)
SFS order:Assets (current assets,non-current),Total
assets(net), Liabilities(current/non-current),Total
Liabilities,Stockholders’ Equity (Share Capital,
retained earnings),Total equity,Total liabilit and
equity
In this order: Share cap, dividends,revenue, expense
End of day,assets = liabilities+equity in trial balance
Prepare income stmtt→prepare stmtt of changes in
equity+stmtt of cash flows→stmt of financial position
Revenue recognition principle:
1) Goods has been delivered, or services rendered.
2) Seller’s price to buyer is fixed or determinable.
3) Persuasive evidence of a paymt arrangemt exists.
4) Payment realized or realizable (collectibility is
reasonably assured).
Chapter 3 Adjusting entry:
i) Unearned revenue (cash receive before job)
Jan 1, 2020 Dr Cash(A) $40 million
Cr Unearned Revenue(L) $40 million
Adjustment entries periods after:
Dec 31 Dr Unearned Revenue (L) $10 million
Cr Sales Revenue (SE) $10 million
ii) Accrued Revenue (gain after)
Adjustment entry (no initial entry cus no transaction):
ST notes payable- Dr cash 7000 Cr notes payable
7000 When repay:Dr Notes payable 7000 Dr income
expnse 350 Cr cash 7350
Dec 31 Dr Accounts Receivable(A) $10 million
Cr Sales Revenue (SE) $10 million
Cr Sales Revenue (SE) $10 million
Cr Accounts Receivable (A) $30 million
iii) Prepaid Expense
Jan 1, 2020 Dr Prepaid Rent (A) $4m
Cr Cash (A) $4 m
Adjustment entries:
Dec 31 Dr Rent Expense (SE) $1 m
Cr Prepaid Rent Expense (A) $1 m
Note: if all used in one period, straight Dr Expense
Depreciation
Jan 1, 2020 Dr PPE – Truck (A) $200,000
Cr Cash (A) $200,000
Find out (cost-salvage value)/useful life to dep. ,
Dec 31 Dr Depreciation Expense (Exp) $40,000
Cr Accumulated Depreciation (XA) $40,000
iv) Accrued Expense (pay after)
Adjustment entry (cus no initial transaction):
Dec 31 Dr Interest Expense (SE) $4 m
Cr Interest Payable (L) $4 m
Last entry:Dec 31, 2023 Dr Interest Expense $4 m
Dr Interest Payable (L) $12 m
Cr Cash (A) $16 m
Effect on Balance sheet and income statement:
i) Unearned revenue BS: liability overstated, equity
understated IS: Revenue understated
ii) Accrued revenues BS: Asset understated, equity
understated IS: revenue undertstated
iii) Prepaid expense BS: Asset overstated, equity
overstated IS: Expense undertated
iv) Accrued Expenses BS: Liability understated,
equity overstated IS: Expense understated
Income Statement/Statement of PnL Order:
Sales Revenues
- Cost of Good Sold
Gross Profit (or Gross Margin)
- Operating Expenses (indent salary expense, rent..,
depreciation, amortization)
Operating Income
+/- Interest income/Interest Expense ,+/- Other
Gain/Loss ,+/- Non-recurring events
Pofit before tax, - Income Tax Expense
Net Income (goes into retained for S.C. equ
Other CI, CI
Statement of Changes in Equity(bracket is headers):
(share cap, retained ear, total eq)Beginning Balance,
net income,dividends declared etc,ending balance
Closing the Books: permanent keep,temporary close
Permanent: balance sheet, temporary:income stat..
Steps: replace temporary with income summary:
1.Debit revenues (credit expenses and retained
earnings(net gain))=>if net loss, debit to RE
2. Debit RE and credit dividends
Chapter 5 receivables
Record credit sales individual AR ledger: Dr Acc
Receivable–Customer Name X Cr Sales Rev X
Record collection on credit: Dr Cash XXX
Cr Accounts Receivable – Customer Name XXX
Credit card sales:
Dr Cash $9,700 or Dr Ac Receivables - Credit card
Dr Credit Card Expense $300 Cr Sales Rev $10000
debt previously written of:
1) Aug 2020 Dr AR – name XX Cr BDE/ECL XX
2) Aug 2020 Dr Cash XX Cr AR– name XX
Effect of direct write-off:
1st year understate expense, overstate net income,
overstate equity, overstate asset(Acc rec.)
Allowance method:
1)record bad debt expense
Dec 2019 Dr Expected credit loss $50,000
Cr Loss allowance $50,000
Stmt of FP impact: assets decrease by 50000(-LA)
Income Stmt impact: Expenses incr. ECL. $50000
2)writeoff: Dr.Loss Allowance $2500
Cr. Accounts Receivable – name $2500
Note: does not affect income stmt acct as ECL
taken, does not affect AR on SFP as - frm allowance
Estimation: % uncollectible for individual,%
uncollectible per time period in provision matric for
group, add up all is allowance target bal.
Bad debt expense is amount required to rch target
Computation interest: XX x % x time period (3/12eg)
Recognise interest income: Dr interest receivable Cr
Interest income (360 days)
Collection:Dr Cash 52500 Cr all Interest Receivable
1250 Interest Income 1250 Note Receivable 50000
*take note of the fiscal period
Chapter 6 inventory and COGS
Inventory costs:all expenses necessary to bring item
to salable condition and location (Merch inventory)
Cost of PPE = purchase price + necessary costs to
bring the asset to location and condition for use
(excludes financing charges and cash discounts)
Beginning inventory+net purchases = merchandise
available for sale= ending inventory + COGS
2/15,n/60, 2% discount if you pay in 15 days if not
pay nett in 60 days
Inventory acc: Dr beg bal, Cr COGS, Dr purchases
A/P: Cr beg bal, Cr purchases, Dr cash paid
Prepaid rent acc: Dr beg bal, Cr rent expp, Dr cash
paid Ending inv 2019= beg inv 2020
Purchase Discount/Allowance (buyer POV):
June 1 Dr Inventory(purchases) 5000 Acc Payable
5000 Purchased inventory on credit, terms 2/15,n/60
June 15 Dr Acc Payable 5000 Cr Inventory(purchase
discount) 100 Cr Cash 4900
Seller POV: Dr Cash Dr Sales Discount Cr Acc rec.
Seller sell inv on credit= Dr A/R Cr sales rev Dr
COGS Cr inv
BuyerReturn: Dr Acc Payable $200 Cr Inventory
(purchase return) 200
FOB shipping:the buyer of the product acquires
ownership and bears the shipping cost.
Transport cost: Dr Merchandise Inventory Cr Cash
FOB destination:Seller bears the shipping cost
merchandise purchases= Invoice cost-Purchase
discounts, returns, allowances+Costs of transport
Seller receive return: Dr sale return and allowances
Cr Acc Receivables, Dr Mer. Inventory Cr COGS
Adj inv shrinkage: Dr COGS Cr Inv
Weighted Average cost: average cost per unit=COG
available for sale/ no. of units
COGS=no. Sold x average cost per unit
Comparing between three: depends on the COGS
sold via each method, affecting ending inventory
Record inventory between lower of cost and NRV
NRV: value for which an asset can be sold, minus
the estimated costs of selling or discarding the asset
Writing down to NRV/Impairment of inventory:
Dr COGS Cr Allowance to inventory write down
Inv- allw to write down= net inv
Chapter 7 Cash *rmb the heading(company,date)
Bank Reconciliation:verify accuracy of bank & book
Order (Bank first): Bank stmt balance, add Deposits
in Transit, net, Deduct outstanding checks,+/-errors,
adjusted bank balance.Book Balance,Add collections
& interest earned,deduct uncollectible items(NSF
checks) & fees,+/- errors, adjusted book balance,
both balance should equate
After, record adjusting entries to book side of recon,
Collection fee received& sc: Dr Cash 485 Dr
Collection Expense 15 Cr Notes Receivable 500
Interest Revenue: Dr Cash 8 Cr Interest Rev 8
Misc bank charge: Dr Misc. Expenses 2 Cr Cash 2
bounced Check/NSF: Dr A/R 30 Cr Cash 30
Chapter 10 Current Liabilties
Known liability: Acct payable, Unearned revenue,
GST payable, ST notes payable, payroll liabilities,
multi-period known liabilities
Sales tax payable: Dr cash/ AR 10700 Cr sales
revenue 10000 Cr GST payable 700
Payment of GST to IRAS:
Dr GST payable 700 Cr Cash 700
CPF contribution: Dr Salaries expense 10000 Cr
Salaries payable 8000 Cr CPF payable-employee
2000 (20%) // Dr payroll expense-CPF 1700 Cr CPF
payable-employer 1700
Recording warranty liabilities: Dr Warranty expense
1500 Cr warranty Provision 1500
Replacement cost: Dr warranty provision 120 Cr
parts inventory 120
Chapter 9: Non-current assets (PPE & Intangible)
PPE purchased by issuing shares
- Use fair value of the PPE if it can be measured
- If not use the mkt price of shares
Carrying amt/ NBV= cost-depreciation exp
Costs of disposal is recorded in PPE provision acc
Revenue vs Capital expenditure
Rev - does not increase productivity or useful life
- treated as an expense (income statement)
Capital - major overhaul / extends useful life
- treated as an asset under PPE (balance sheet)
(affects expenses, current profit and taxes)
Depreciation methods Bad Debt expense: same period sales occur Vertical analysis:
(requires known cost, residual value and useful life) Direct write-off method (NA): July 2020 Dr Bad Debt Common-size percent(%) =
1. Straight line depreciation Operating activities: revenue-producing activities that Analysis amt Total equity
cost – residual value include transactions/events that determine net profit ×100 ⑯ Equity ratio =
Dep exp = e.g. INFLOWS: cash receipts from sale of goods and Base amt Total assets
useful life rendering of services, cash receipts from royalties, *Base: revenue in income statement OR total assets Total liabilities
2. units of production Dep exp fees, commissions OUTFLOWS: Cash payments to in statement of financial position. ⑰ Debt-to-equity ratio = (↑ ratio,
= suppliers for goods and services(buying inventory), Summary of Ratios Total equity
cash payments to and on behalf of employees Profitability (all in % except ③)
(cost −residual value) less opportunity to expand through use of debt financing)
× actual units produced e.g.CPF Net profit Times interest earned=
useful life ∈units Investing activities: ① Profit margin ratio = (higher ratio 👍) Net profit +interest expense+income tax
3. Declining-Balance Depreciation Acquisition and disposal of long-term assets and Net sales
Eg. useful life of 4 years - straight line rate (¼ per yr) other investments E.g. INFLOW: cash receipts from Net profit Interest expense
Yearly dep = 2* (¼) *acquisition cost sale of PPE, intangibles and other LT assets, sale or ② Return on total assets = Market Prospects (⑲ no units, ⑳ in %)
Journal entry maturity of investments in securities, repayment of Average total assets ⑲ Price-earnings ratio=
loans made to other parties. OUTFLOW: cash
Dr Depreciation expense, Cr accumulated dep = Profit margin × Total asset turnover Market price per ordinary share
Changes in dep exp: acquisition cost-acc. Dep-new payments to acquire (same as Inflow), cash
Allowance: Dr salereturnandallowance Cr Acc rec.
residual value=new revised cost// new cost/ advances and loans made to other parties
Adjust for theft/loss: Dr COGS Cr Mer. Inventory
Earnings per share
remaining useful life= revised annual dep from yr n Financing activities: *higher ratio → higher expectations of future growth in
*Net Profit: Use “profit for the year” or “profit before
Disposal of PPE (if loss, dr loss on disposal, cr cash) related to external sources of financing e.g. interest expense and income taxes” figure. earnings, but doesn’t mean company is a better investment
INFLOWS: Cash proceeds from issuing shares or
*higher ratio 👍 = higher return (net profit) company
→ share could be overpriced, expectations of future
other equity instruments, cash proceeds from issuing growth earnings may not materialise and shares with high
loans,notes,bonds,mortgages and other borrowings. P/Es are riskier.
OUTFLOWS: cash payments to owners to earns from its asset
⑳ Dividend yield =
acquire/redeem entity’s shares, cash repayments of ③ Basic earnings per (ordinary) share
Impairment of PPE amts borrowed e.g. pay dividends, share buybacks = Annual cash dividends per share
- when carrying amount > recoverable amount Net profit −Preference dividends
Direct method: Market price per share
CFO: cash collect from cust: (a)+(b) Cash flow
AR account: Dr beg bal, Dr credit sales, Cr cash Weighted−average ordinary shares outstanding 21 Cash Flow to net income =
collected(a), (Cr write off AR),Dr ending bal Loss cents per share
Intangible assets (patents, copyrights, trademarks)
allowance acc: Cr beg bal, Cr ECL, Dr Write off AR, ④ Return on ordinary shareholders’ equity (ROE) Cash flow ¿ operations ¿
Finite useful life-amortised using straight line method
Indefinite useful life - not amortised, subject to
Cr ending bal unearned revenue acc: Dr beg bal, Cr = net income
annual impairment testing
revenue, Dr cash collected(b), Dr ending bal Net profit− preference dividends 22 cash flow adequacy =
Chapter 12: Equity
Cash paid for inv: Inv acc: *refer to inv chapter (if
cash ¿ operations
flowpremium) ¿
there is prepay inv: Cr inv in inv acc) average(share capital+retained earnings+share
Ordinary shares - voting rights, entitled to dividends,
Interest R: Dr beg, Dr income, Cr cash collected Liquidity and Efficiency (all no units|⑧⑪-⑬ in days) Cash paid for CAP
not redeemable Preference shares - usually no dupont framework
prepaid: Dr beg, Cr rent exp, Dr cash paid
voting rights, senior to OS for dividends, usually
CFI: PPE acc: Dr beg, Dr cash paid, Cr
Current assets ROE=
fixed dividend rate ⑤Current ratio = (2:1 or
Treasury shares is a contra equity acc (debit bal)
disposal(initial cost) A.D acc: Cr Beg, Cr dep exp, Dr Current Liabilities Returnon sales∗Asset turrnover∗Assets
Disposals (A.D) *refer to disposal of ppe JE 1.5:1 ratio 👍)*high CR :strong ability to meet short- =
*common stock use par value, cash use market price
term obligations, but also inefficient asset use
Buy back : Dr Treasury shares, Cr Cash net income net sales avg total
Shares outstanding = shares issued-treasury shares × ×
If TS are reissued higher than cost, ⑥Acid-test net sales avg total assets avg total
ratio= *1.ability to generate income 2.ability to generate
Dr Cash, Cr TS and Cr Premium on TS (equity acc)
If TS are reissued at a loss, Cash+ short −term financial assets+current
salesreceivab
from the use of assets 3.use borrow funds
Dr Cash and Dr Premium on TS/RE, CR TS instead of invested funds
Share split/Bonus issue
Current liabilities Other ratios/ equations
2-1 share split cuts the par value/stated value in half (higher ratio 👍, like CR but exclude inventories & Times interest earned =
prepaid expenses when calculating)
2 for 1 share split = 1 for 1 bonus issue
⑦ Accounts receivable turnover = Profit before interest expense∧income ta
No journal entry required if no issue price
a reduction in par value will prop increase the no. Of Net sales Interest expense
shares outstanding Weighted average cost=
Avg accountsrecei , net
Cash Dividends
@Declaration date: Dr dividends, Cr dividends Avg accounts receivable = Cost of goods available for sale
payable (L) ( Beg AR+ Ending AR) units on hand at date of sale
@Payment date: Dr dividends payable, Cr Cash Book value per ordinary share
Stock dividends 2 =
@Declaration date: Dr stock dividend, Cr div *higher ratio👍 = more able to receive and collect its
distributable cr paid in capital excess of par Chapter 14: Financial Statement Analysis accounts receivables more efficiently. Shareholders' equity applicable ¿ ordinar
@Distribution: Dr div distributable, Cr common stock Horizontal analysis: ⑧ Days’ sales uncollected =
Cash flow on total assets =
@Closing: Dr RE, Cr stock dividend Comparative statement: 365
Chapter 13:Statement of Cash Flows Dollar △= Analysis period amt - base period amt *lower no. of Net cash ¿ operating activities ¿
Order: CFO, CFI, CFFc net increase(decrease) in Percent △ (%) = account receivable turnover Average to
cash, cash(&equiv) bal at prior period end , cash days 👍 Free cash flows = net cash from operating act. - capital expenditures
(&equiv) bal at current prior period end Analysis period amt−Base period amt Cost of goods sold Fraud:corruption,asset misappropriation,FS fraud,
Cash Equivalents (highly liquid & stable value) ⑨ Inventory turnover = cause by opportunity, rationalization and pressure
Base period amt Average inventory Internal control:Safeguard assets,operational
*100 *high ratio preferable, but low ratio= inefficient use of efficiency,accurate records,adherence to policy&law
assets. Too high a ratio suggests inventory too low. Methods:Establish responsibilities,Maintain adquate
⑩ Accounts payable turnover = recordsInsure assets&bond keyemployees,Separate
Cost of goods sold record keeping from custody of assets,Divide
responsibility for related transactions,Apply
Average accounts payable technological controlsPerform regular and
independent reviews,proper cash handling(deposit..)
365 Limitations:human error/fraud, costs > benefit
⑪ Days’ sales in inventory =
inventory turnover
Share buybacks and treasury shares *lower no. of days 👍
Why? - used to buy other companies, avoid hostile ⑫ Days’ Purchases in Accounts Payable
takeover, reissue to employees, support mkt price
Avg Accounts payable
Classification of preference shares = × 365(lower no.
- (non) convertible - ability to convert to OS purchases
- (non) redeemable - company can to buy back PS of days 👍)
- (non) cumulative - any unpaid dividends in prev ⑬ Cash conversion cycle = (sum of days’ sales
years must be paid to PS holders before OS uncollected + days’ sales in inventory - days’ purchases in
- (non) participating - additional div upon certain goal accounts payable) days
*the more -ve/ lower, the more healthy the company Effect on journal entry accounts, effect on equation
(A=L+E), effect on income statement
Net sales (expenses/revenue)
⑭ Total asset turnover =
Average total assets
(higher 👍)
*If asked fixed asset=> PPE
Solvency (all in % except ⑰⑱ in times)
Cost of PPE = purchase price + necessary costs to Total liabilities
bring the asset to location and condition for use ⑮ Debt ratio = (↑ ratio, highly
(excludes financing charges and cash discounts) Total assets
leveraged, high level of debt to finance assets, ↑
unhealthy)

Revenue for Bundled goods/services steps:

1)Find out weightage of each product if all sold alone
2)allocate this percentage to the bundled price
3)allocated price to each prod/servic is revenue each

Dr Sales Revenue 73,500

Dr Other Income/Loss 150
Cr Income Summary 73,650 Avg accounts payable* =
Dr Income Summary 63,500 Beg acc payable+ending acc payable
Cr Cost of Sales 16,700
Cr Salaries Expense 20,000 2
Cr General Admin Expense 7,000 … Avg inventory =
Dr Income Summary 10,150 (net income, balance Beginning Inventory + Ending Inventory
income summary btwn rev. & exp., div,
Cr Retained Earnings 10,150 (add to begin bal. eq) 2
Direct method (Preferred method): Disclose major
( Beg assets +ending assets )
Avg assets =
classes of gross cash receipts and gross cash 2
payments. Method to prep SCF:
1) Compute net increase/decrease in cash using
current and previous periods’ balance sheet
2) Compute net cash from Operating activities, then
3) investing and 4) financing.
5) Beginning cash balance + (2+3+4)=Ending cash
balance

Chapter 10: Current liabilities Step1) Purchases = COGS(+Increase in Merch

Define: Due to past event... company has a present inventory) or (-Decrease in Merch Inventory
obligation...for future sacrifice Step2) Cash paid for merch = Purchases(+Decrease
Current liability: paid within 1 yr or the company's in A/P) or (-Increase in A/P)
Cash paid for other operating expenses = Other
operating cycle whichever longer
Long term liability :opp of current liability
Known liability: Acct payable, Unearned revenue,
GST payable, ST notes payable, payroll liabilities,
multi-period known liabilities
ST notes payable:Debit: acct payable credit :note
payable
Multi-Period known liability: include unearned
revenues and notes payable
Estimated liability: known obligation that is of an
uncertain timing or amt but that can be reliably
estimated (Provisions)
Warranties: Seller obligation to replace a pdt that
fails
operating expenses +/- Increase/decrease in prepaid
expenses and +/- Decrease/Increase in accrued
liabilities. For Noncash investing and financing
activity e.g. purchase PPE with issuance of notes
(Put it in note below the SCF)
Indirect method: Start with P&L. Must explain
adjustments for transactions (Non-cash add back)
Adjustment → explanation
Increase in A/R → Cash collection less than sales
Increase in Merch inventory→ Purchases more than
COGS (Need 2 adjustments)
Increase in prepaid expenses →Cash payments for
expenses exceed expenses
Decrease in A/P→ Cash payments for purchases more
than purchases
Dividend income→ Removed to disclose cash dividends
received separately as required
Interest expense→ Removed expense to disclose cash
interest paid separately as required