Tips and secrets on how to pass the Certified Public Accountant (CPA) Board Exam

Passing the CPA Board Exam is one tough task for anyone who aims to become a Certified Public Accountant. It is described by many critiques as one of the most difficult professional board exam an aspiring professional can take. This is true since accounting requires both theoretical and mathematical skills to fully absorb its knowledge and expertise. During my time of review and before I passed the CPA Board exam, I realized some simple reflections that greatly helped me in reaching my dream of becoming a CPA. Whenever people ask me for advices on how to pass the CPA test, the following are my answers: Read more

External Auditing of Financial Statements: Its Importance to Your Company and Business

Do you have your own company? Do you prepare financial statements for tax, loans and other compliance purposes? If yes, then you may already experience appointing a C.P.A. (Certified Public Accountant) to audit your financial statements. According to GAAS (Generally Accepted Auditing Standards), auditing is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between those assertions and established criteria and communicating the results to interested users. Read more

What are cash and cash equivalents?

Cash and cash equivalents are the most liquid assets that are reported in the asset section of a company’s balance sheet. It is the first account of your balance sheet and accordingly in your chart of accounts. Cash includes money and any other negotiable instrument that is payable in money and acceptable by the bank for deposit and immediate credit. This means that cash includes bills, coins, checks, bank drafts and money orders because they are acceptable by the bank for deposit or immediate encashment. Postdated checks are not considered as cash yet because these checks are unacceptable by the bank for deposit and immediate credit or outright encashment. These checks will only be considered as cash when their indicated dates arrive. Cash must be unrestricted in use. This means that an item to be recognized and reported as cash must be readily available in the payment of current obligations and not subjected to any restrictions. Read more

Definitions and sources of owner’s, partners’ and stockholders’ equity:

Ownership equity is the residual interest in the assets of the entity after deducting all its liabilities. In the accounting equation as presented in the balance sheet, equity equals assets minus liabilities. This means that ownership equity is composed of all the entity’s resources which are not obtained from debts. In other words, it consists of all the resources derived from owners’ contribution.

Equity differs depending on the structure of an entity. A sole proprietorship which is owned solely by a proprietor presents its equity as an owner’s equity. Accounting for owner’s equity in a single proprietorship is simple. Owner’s equity in this form is increased when the owner contributes capital or realizes net profit. It is then decreased when the owner draws capital or incurred a net loss. Read more

The Importance and Uses of Notes to the Financial Statements

The complete set of financial statements include the balance sheet, income statement, statement of changes in equity, cash flow statement and notes to the financial statements. If you will read the first four financial statements mentioned above, you will see notes referring to numbers after each accounts in those financial statements. At the footer of the balance sheet, income statement, statement of changes in equity and cash flow statement, you will see a phrase saying “see accompanying notes to the financial statements” or “the accompanying notes are integral parts of these financial statements”. The first four financial statements are linked to the notes to the financial statements to provide clearer and complete financial information to the users of financial statements. Read more

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