A Certified Practicing Accountant (also known as a CPA), is the title you earn after thorough testing which proves you are qualified to work in various English-speaking countries such as the United States of American and Australia. The minimum requirements of becoming a CPA in North America will include passing the Uniform Certified Public Accountant Examination after at least 150 semesters of higher education, and at least one year of experience in accounting. Under the CPA exam there are 4 sections: FAR, BEC, AUD, and REG. This CPA tutor will teach you how to pass CPA FAR with flying colors.
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First off, what does FAR stand for?
FAR means Financial Accounting and Reporting. Many students struggle with this section, as this is the bit where you will be crunching numbers and performing numerous calculations.
However, it is first important to understand certain key points as this will make it easier to pass this section on the first try. Here are a few important sections to focus on:
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Accounting of Accrual Basis
Every single FAR test covers the accounting of the accrual basis method, which is made necessary by the General Accepted Accounting Principles (also known as, GAAP). This method specifies instructions on how to use the principle of matching. In other words, the CPA must have matching revenues that were generated with the expenses sustained to allow further production of the revenue, despite the outflows and cash inflows. It is difficult to keep things straight and organized in your mind but just remember that adjusting entry includes a balance sheet account and an income statement account (also known as Profit and Loss Account or Profit and Loss Statement).
Bond Premiums and Discounts
Bonds accounting can be poorly explained and especially so if the instructor is relatively new in the service industry of finance. Professionals of the finance department may have to explain bond premiums and discounts to the business’ customers and answer any questions for clarifications. Bonds are often issued at the initial amount of $1000 or more within the range of $1000, give or take. As they are traded during exchanges, the bonds can be bought or sold at altering prices. A bond premium creates more expenses on the buyer’s point of view whilst discount is seen as an income for the buyer.
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Capital Lease
Should the business owner be leasing a property or a vehicle, it can be treated as a capital lease or an operating lease. CPA candidates should be able to identify certain criteria that should be met for an operating lease. It means it is an asset to the company when the owner enters into the lease agreement. An operating asset means that there are no assets made when the owner enters the lease agreement. A capital lease is necessary to be posted as an asset for certain leased items.
Methods of Depreciation
There are various sorts of depreciation of assets’ worth. There is the total depreciation where the total amount of dollars depreciated is the same despite the chosen method. Timing, where it is related to the timing of the expense. Accelerated methods will post even more of depreciation expenses in the first years and gradually becomes lesser in the later years. The straight-line method, however, records the same amount each year.
Final Thoughts on the Financial Accounting and Reporting (FAR) Exam
The Financial Accounting and Reporting (FAR) section of the CPA exam is a comprehensive and challenging test that assesses a candidate’s knowledge and understanding of various accounting principles, financial reporting standards, and their application in real-world scenarios. As candidates approach the end of their FAR exam preparation journey, it is essential to reflect on the experience and focus on some key takeaways.
Firstly, time management plays a critical role in success. The FAR exam is known for its length and complexity, and managing time efficiently is vital to complete all the questions within the allotted timeframe. Candidates must practice with timed mock exams to develop a solid time management strategy that ensures they can cover all topics thoroughly.
Secondly, a strong grasp of core accounting principles is fundamental. FAR encompasses a wide range of topics, including revenue recognition, leases, pensions, and consolidations, among others. It is essential to thoroughly understand these principles and how they apply to various business situations.
Thirdly, staying up-to-date with accounting standards and pronouncements is crucial. Candidates should regularly review the latest changes and pronouncements issued by standard-setting bodies to ensure they are familiar with the most current guidelines.
Moreover, seeking additional support through review courses, study groups, or a CPA tutor can be beneficial. These resources provide candidates with valuable insights, explanations, and techniques for tackling difficult concepts effectively. Joining a study group can also foster a collaborative learning environment where candidates can discuss challenging topics and learn from one another. Maintaining a positive and focused mindset is crucial during the exam preparation period. The FAR exam can be mentally demanding, and candidates may encounter difficult questions that can be discouraging.
In conclusion, success in the Financial Accounting and Reporting (FAR) exam requires dedication, thorough preparation, and a clear understanding of accounting principles and financial reporting standards. By managing time effectively, staying updated with the latest standards, practicing with sample questions and simulations, seeking additional support, and maintaining a positive mindset, candidates can approach the exam with confidence and increase their chances of achieving a passing score.
