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Accountants Guidebook #361726

Course Overview

Credit

Amount

CPA

Course Author: Steven M. Bragg, CPA Field of Study (CPA): Accounting

Course Description

Course publication/revision date: This course was updated on 3/8/2026.

The accountant is responsible for many activities, which may require years of training and experience to fully comprehend. The breadth of knowledge required can seem overwhelming. The Accountants’ Guidebook is designed to simplify matters by providing the accountant with a practical knowledge of how to complete many accounting tasks, while also imparting an understanding of the more critical accounting standards. Topics covered include accounting procedures, GAAP for common transactions, closing the books, producing financial statements and other reports, collection tactics, payroll management, budgeting, and much more. In short, this is the essential desk reference for the accountant.

Table of Contents

Chapter 1 – The Role of the Accountant1

The Accountancy Concept	1
Financial and Managerial Accounting	3
Types of Accountants	4
Responsibilities of the Accounting Department	5
Organizational Structure of the Accounting Department	7

Chapter 2 – The Chart of Accounts11

Overview of the Chart of Accounts	11
The Three-Digit Chart of Accounts	12
The Five-Digit Chart of Accounts	14
The Seven-Digit Chart of Accounts	15
Chart of Accounts Reduction	18
Alphanumeric Account Coding	20

Chapter 3 - The General Ledger and Trial Balance22

The Ledger Concept	22
General Ledger Overview	23
The Accounts Receivable Ledger	24
The Purchase Ledger	25
The Fixed Assets Ledger	26
Overview of the Trial Balance	26
The Trial Balance Format	26
The Extended Trial Balance	28
Trial Balance Error Correction	29
The Post-Closing Trial Balance	30
Evaluation of the Trial Balance	31

Chapter 4 - Accounting Procedures33

The Nature of a Procedure	33
The Need for Procedures	33
The Number of Procedures to Develop	34
The Mechanics of Procedure Production	35
Procedure Design Tips	37
Dissemination of Procedures	38
Procedural Updates	39
Enforcement of Procedures	40
Deviations from Procedures	41
Presented Procedures	41
The Credit Examination Procedure (Manual System)	41
The Shipping Procedure (Manual System)	46
The Billing Procedure	49
The Check Receipts Processing Procedure	52
The Purchasing Procedure	56
The Supplier Invoice Processing Procedure (Manual System)	58
The Check Payment Issuance Procedure	62

Chapter 5 – Accounting for Receivables67

Accounting for Billings	67
Accounting for Sales Taxes	68
Accounting for Use Taxes	70
The Allowance for Doubtful Accounts	71
Notes Receivable	73
Acquisition, Development, and Construction Arrangements	75
Nonrefundable Fees and Other Costs	76
Receivables Presentation	79

Chapter 6 - Accounting for Investments82

Overview of Investments – Debt and Equity Securities	82
Accounting for Investments	82
Impairment of Investments	83
Restricted Stock	84
Dividend and Interest Income	84
Credit Losses	85
The Equity Method	85

Chapter 7 – Accounting for Inventory89

Overview of Inventory	89
The Periodic Inventory System	91
The Perpetual Inventory System	92
Inventory Costing	93
The First In, First Out Method	93
The Last In, First Out Method	94
The Weighted Average Method	96
Standard Costing	97
The Retail Inventory Method	98
The Gross Profit Method	99
Overhead Allocation	100
The Lower of Cost or Market Rule	103
Work in Process Accounting	104
Accounting for Obsolete Inventory	105
Consignment Accounting	106
Goods in Transit	107

Chapter 8 – Accounting for Property, Plant, and Equipment109

Overview of Fixed Assets	109
Initial Fixed Asset Recognition	110
Fixed Assets Acquired through a Business Combination	111
Nonmonetary Exchanges	111
Depreciation and Amortization	115
Straight-Line Method	116
Sum-of-the-Years' Digits Method	116
Double-Declining Balance Method	117
Depletion Method	118
Units of Production Method	120
Land Depreciation	120
Land Improvement Depreciation	121
Depreciation Accounting Entries	121
Fixed Asset Impairment	123
Fixed Asset Disposal	125
Assets Held for Sale	125
Abandoned Assets	130
Idle Assets	130
Fixed Asset Disposal Accounting	130

Chapter 9 – Accounting for Intangibles133

Goodwill	133
General Intangibles Other than Goodwill	136
Internal-Use Software	138
Internal-Use Software Accessed via a Hosting Arrangement	141
Website Development Costs	142

Chapter 10 – Accounting for Equity144

Overview of Equity	144
The Sale of Stock	144
Dividend Payments	145
Stock Dividends and Stock Splits	145
Stock Dividend	146
Stock Split	146
Treasury Stock	147
Purchase of Treasury Stock	147
Resale of Treasury Stock	147
Cost Method	147
Constructive Retirement Method	148
Equity-Based Payments to Non-Employees	149
Initial Recognition	149
Spinoffs and Reverse Spinoffs	151

Chapter 11 - Revenue Recognition154

Topic 606, Revenue from Contracts with Customers	154
The Nature of a Customer	154
Steps in Revenue Recognition	155
Step One: Link Contract to Customer	155
Step Two: Note Performance Obligations	157
Step Three: Determine Prices	159
Variable Consideration	160
Possibility of Reversal	161
Time Value of Money	162
Noncash Consideration	164
Payments to Customers	165
Refund Liabilities	166
Step Four: Allocate Prices to Obligations	166
Allocation of Price Discounts	167
Allocation of Variable Consideration	168
Subsequent Price Changes	169
Step Five: Recognize Revenue	169
Measurement of Progress Completion	171
Output Methods	171
Input Methods	172
Change in Estimate	173
Progress Measurement	173
Right of Return	173
Consistency	174
Contract Modifications	174
Treatment as Separate Contract	174
Treatment as Continuing Contract	175
Entitlement to Payment	177
Bill-and-Hold Arrangements	177
Consideration Received from a Supplier	178
Customer Acceptance	180
Customer Options for Additional Purchases	180
Licensing	182
Nonrefundable Upfront Fees	183
Principal versus Agent	184
Repurchase Agreements	185
Unexercised Rights of Customers	186
Warranties	187
Contract-Related Costs	188
Costs to Obtain a Contract	188
Costs to Fulfill a Contract	189
Amortization of Costs	190
Impairment of Costs	190
Exclusions	190
Revenue Disclosures	191

Chapter 12 - Accounting for Payroll196

The Chart of Accounts	196
Types of Payroll Journal Entries	197
Primary Payroll Journal Entry	198
Accrued Wages	199
Accrued Bonuses	200
Accrued Commissions	201
Benefit Payments	201
Accrued Benefits	202
Stock Subscriptions	203
Manual Paycheck Entry	204
Employee Advances	204
Accrued Vacation Pay	205
Tax Deposits	206
Payroll Information in the Financial Statements - Wages	206
Payroll Information in the Financial Statements – Payroll Taxes	206

Chapter 13 – Accounting for Stock-Based Compensation209

Overview of Stock Compensation	209
The Volatility Concept	212
Fair Value Calculation Alternatives	213
Awards Classified as Equity	215
Award Measurement Problems	215
Contingent Features	215
Award Modifications	215
Income Tax Effects	216
Awards Classified as Liabilities	216
Employee Share Purchase Plans	217
Employee Stock Ownership Plans	218

Chapter 14 – Accounting for Income Taxes220

Overview of Income Taxes	220
Accounting for Income Taxes	222
Tax Positions	222
Deferred Tax Expense	224
Applicable Tax Rate	224
Interest and Penalties	224
Intraperiod Tax Allocation	225
Taxes Related to Undistributed Earnings	225
Interim Reporting	226
Income Taxes Presentation	228

Chapter 15 – Accounting for Business Combinations231

Overview of Business Combinations	231
Identifiable Assets and Liabilities, and Noncontrolling Interests	233
Goodwill or Gain from Bargain Purchase	235
Goodwill Calculation	235
Bargain Purchase	235
Reverse Acquisitions	236
Related Issues	238
Acquisition of Assets	238
Transactions between Entities under Control of Same Parent	238
Pushdown Accounting	239
Income Taxes	239
Business Combination Disclosures	240
General Disclosures	240
Identifiable Assets and Liabilities, and any Noncontrolling Interest	241
Goodwill or Gain from Bargain Purchase	242
Reverse Acquisitions	242
Transactions between Entities under Control of Same Parent	243
Income Taxes	243

Chapter 16 - Foreign Currency Matters245

Foreign Currency Transactions	245
Financial Statement Translation	246
Determination of Functional Currency	246
Translation of Financial Statements	248
Use of Average Exchange Rates	250
Hyperinflationary Effects	250
Derecognition of a Foreign Entity Investment	250
Foreign Currency Disclosures	251

Chapter 17 - Accounting Changes and Error Corrections253

Changes in Accounting Principle	253
Changes in Accounting Estimate	254
Changes in Reporting Entity	254
Correction of an Error in Previously Issued Financial Statements	255
Corrections Related to Prior Interim Periods	255
The Materiality of an Error	255
Accounting Changes and Error Corrections Disclosures	255
Change in Accounting Principle	255
Change in Accounting Estimate	256
Change in Reporting Entity	256
Error Corrections	256
Historical Summaries	257

Chapter 18 - Closing the Books260

Prior Steps: Update Reserves	260
Core Steps: Issue Customer Invoices	261
Core Steps: Value Inventory	263
Core Steps: Calculate Depreciation	265
Core Steps: Create Accruals	267
Core Steps: Consolidate Division Results	268
Core Steps: Eliminate Intercompany Transactions	268
Core Steps: Review Journal Entries	269
Core Steps: Reconcile Accounts	269
Core Steps: Close Subsidiary Ledgers	271
Core Steps: Create Financial Statements	271
Core Steps: Review Financial Statements	271
Core Steps: Accrue Tax Liabilities	272
Core Steps: Close the Month	272
Core Steps: Add Disclosures	272
Core Steps: Write Cover Letter	273
Core Steps: Issue Financial Statements	274
Delayed Steps: Issue Customer Invoices	274
Delayed Steps: Closing Metrics	274
Delayed Steps: Document Future Closing Changes	275
Delayed Steps: Update Closing Procedures	275

Chapter 19 - The Financial Statements278

The Income Statement	278
Income Statement Overview	278
The Single-Step Income Statement	281
The Multi-Step Income Statement	281
The Condensed Income Statement	282
The Contribution Margin Income Statement	282
The Multi-Period Income Statement	283
How to Construct the Income Statement	284
The Balance Sheet	286
Overview of the Balance Sheet	286
The Common Size Balance Sheet	290
The Comparative Balance Sheet	291
How to Construct the Balance Sheet	292
The Statement of Cash Flows	294
Overview of the Statement of Cash Flows	294
The Direct Method	295
The Indirect Method	297
How to Prepare the Statement of Cash Flows	298
The Statement of Retained Earnings	300
Overview of the Statement of Retained Earnings	301
How to Prepare the Statement of Retained Earnings	302

Chapter 20 - Public Company Financial Reporting304

Interim Reporting	304
The Integral View	304
The Discrete View	305
Comparison of the Integral and Discrete Views	306
Interim Reporting Issues	306
Segment Reporting	306
Primary Segment Reporting Issues	306
The Segment Report	308
Earnings per Share	309
Basic Earnings per Share	309
Diluted Earnings per Share	311
Presentation of Earnings per Share	314
The Public Company Closing Process	314
The Form 10-Q	316
The Form 10-K	317

Chapter 21 - Management Reports321

The Duration of a Report	321
Responsibility Reporting	321
The Flash Report	322
Expense Reporting	323
Margin Reporting	325
Variance Reporting	327
The Purchase Price Variance	328
Material Yield Variance	329
Labor Rate Variance	330
Labor Efficiency Variance	331
Variable Overhead Spending Variance	331
Variable Overhead Efficiency Variance	332
Fixed Overhead Spending Variance	333
Selling Price Variance	333
Sales Volume Variance	334
Problems with Variance Analysis	335
Which Variances to Report	335
How to Report Variances	336

Chapter 22 - Cash Receipts Management339

Check Receipts	339
Check Receipt Improvements	340
The Bank Lockbox	340
Automatic Cash Application	342
Mailstop Number	342
Remote Deposit Capture	343
Cash Receipts	343
Cash Receipts Improvements	344
Credit Card Receipts	345
Debit Cards	345
The Venmo Payment Option	346
The Xoom Payment Option	346
The Zelle Payment Option	347

Chapter 23 - Collection Tactics350

Overview of Collection Tactics	350
Collection Tactics	351
Courtesy Calls	352
Grace Period Reduction	352
Dunning Letters	352
Pay Undisputed Line Items	354
Confirm Payment Date	354
Take Back Merchandise	354
Hold Orders	354
ACH Debits	355
Split Payments	355
Postdated Checks	355
Interest and Penalties	356
Promissory Note	356
Salesperson Assistance	356
COD Roll	357
Barter	357
Arbitration	357
Attorney Letters	358
Final Demand Letter	358
Issue Small Claims Court Complaint	358
The Collection Reputation	359
Credit Repayments	359
The Collection Call	359
Preparation	359
Scheduling	360
Phone Skills	360
Escalation	361
Documentation	361
Collect in Person	361

Chapter 24 - Payroll Management364

Payroll Cycle Duration	364
Streamlined Timekeeping	366
Electronic Payments	367
Employee Self-Service	368
Manager Self-Service	368
Transaction Error Analysis	368
Staff Training Program	369
The Payroll Calendar	370
Information Confidentiality	371

Chapter 25 - Budgeting374

The System of Budgets	374
The Reasons for Budget Iterations	377
Overview of the Revenue Budget	378
The Ending Finished Goods Inventory Budget	380
The Production Budget	383
Production Budgeting for Multiple Products	384
The Direct Materials Budget (Roll up Method)	385
The Direct Materials Budget (Historical Method)	386
The Direct Labor Budget	387
The Manufacturing Overhead Budget	388
The Sales and Marketing Budget	390
Diminishing Returns Analysis	392
The Research and Development Budget	392
The Administration Budget	394
The Compensation Budget	396
The Budgeted Income Statement	399
The Budgeted Balance Sheet	400
Accounts Receivable	401
Inventory	402
Fixed Assets	403
Accounts Payable	404
Additional Estimation Elements	405
The Cash Line Item	406
The Financing Budget	407
The Compiled Balance Sheet	408

Chapter 26 - Capital Budgeting412

Overview of Capital Budgeting	412
Bottleneck Analysis	413
Net Present Value Analysis	413
The Payback Method	415
Capital Budget Proposal Analysis	416
The Outsourcing Decision	417
The Capital Budgeting Application Form	418
The Post Installation Review	420
The Lease versus Buy Decision	421

Chapter 27 - Business Ratios424

What to Measure	424
Measurement Consistency	425
Measurement Timing	425
Deflated Profit Growth	426
Sales per Person	426
Deflated Profit Growth	427
Profit per Person	428
Core Earnings Ratio	429
Breakeven Point	430
Margin of Safety	431
Current Ratio	432
Quick Ratio	433
Working Capital Productivity	434
Debt to Equity Ratio	435
Interest Coverage Ratio	436
Cost per Square Foot	436
Occupancy Cost Ratio	437
Return on Equity	438
Days Sales Outstanding	440
Best Possible DSO	442
Collection Effectiveness Index	442
Inventory Turnover Measurements	443
Sales Productivity	444
Sales Backlog Ratio	444
Customer Turnover	445

Chapter 28 - Cost Object Analysis448

Factors in Cost Object Analysis	448
The Assignability of Costs	449
The Customer Cost Object	450
Customer Acquisition Costs	452
Customer Lifetime Value	452
The Employee Cost Object	453
The Product Cost Object	454
The Product Line Cost Object	456
The Sales Channel Cost Object	458
Cost Object Termination Issues	458
Which Cost Objects to Track	459

Answers to Chapter Questions461

Glossary494

Index500

Course Details

Author: Steven M. Bragg, CPA

Steven Bragg, CPA, has been the chief financial officer or controller of four companies, as well as a consulting manager at Ernst & Young. He received a master’s degree in finance from Bentley College, an MBA from Babson College, and a Bachelor’s degree in Economics from the University of Maine. He has been a two-time president of the Colorado Mountain Club, and is an avid alpine skier, mountain biker, and certified master diver. Mr. Bragg resides in Centennial, Colorado. He has written more than 300 books and courses, including New Controller Guidebook, GAAP Guidebook, and Payroll Management.

Course Exam Questions (online): 150 (multiple-choice)

Program Delivery Method: NASBA QAS Self-Study

Available Formats of Course Text: Downloadable PDF, Printed/Mailed

Course Level, Prerequisites, and Advance Preparation Requirements

License	Course Level	Prerequisites	Advance Preparation Requirements
CPA	Overview	None	None

* This program is appropriate for professionals at all organizational levels.

Sponsor ID Numbers

National Registry of CPE Sponsors I.D.: 107615

State CPA Board Sponsor ID Numbers (where applicable)

Florida Division of Certified Public Accounting: 0004761

Hawaii Board of Public Accountancy: 14003

New York State Board for Public Accountancy: 002146

Ohio Accountancy Board: CPE .51 PSR

Pennsylvania State Board of Accountancy: PX178025

Texas State Board of Public Accountancy: 009349

Learning Objectives

As a result of studying the course material, you should be able to meet the objectives listed below:

Identify the financial and managerial responsibilities of the accountant.
Cite the issues involved with different account code structures.
Specify how information rolls up from subsidiary ledgers into the general ledger, and is organized within the trial balance.
State the flow of various documents through the procedures used by the accountant. Also describe the structure of a procedure, and who is most concerned with its construction.
Identify the key requirements of accounting for receivables.
Cite the accounting for investment transfers and the impairment of securities.
Identify the tracking and cost accumulation systems used for inventory.
State the valuation and depreciation rules applicable to fixed assets.
Specify the rules regarding goodwill impairment and the capitalization of intangible assets.
Cite the rules related to the accounting for various equity transactions.
Identify the evaluation criteria for a contract, the components of the transaction price, and when a contract modification triggers treatment as a new contract.
Identify the proper accounting for the full range of payroll transactions.
Specify the accounting requirements related to stock-based compensation.
Itemize the treatment of tax differences, tax assets and liabilities, and the determination of tax rates.
Cite the accounting for a variety of transactions related to business combinations, as well as the uses of different types of acquisition structures.
Identify the accounting treatment for transactions involving foreign currency.
Cite the applicability of the accounting standards for accounting changes and error corrections to different scenarios.
Identify the steps required to close the books and generate financial statements.
Itemize the different formats in which the financial statements can be constructed, as well as the manner in which they are compiled.
Specify the theories under which interim period information is presented, as well as the rules for segment reporting, and the process of compiling public company reports.
State the types of variances and management report formats that an accountant may use.
Cite the process improvements that can be applied to the management of cash.
Identify the different types of collection tactics, as well as when they should be used.
Specify the best practices and confidentiality issues that should be implemented for a payroll system.
Identify the contents of the various budgets and which techniques should be used to populate the budgets.
State the methods used to examine proposed fixed asset purchases, and their outcomes after being installed.
Cite the calculation methods employed for those ratios most applicable to the role of the accountant.
Specify which costs are to be included in or excluded from the examination of cost objects, as well as how cost objects should be interpreted.