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This course will explain financial accounting from a new angle so that you have some of the background necessary for intermediate courses in financial reporting, analysis, and modeling. The course presents a framework for analysis and provides spreadsheets to implement the framework.


Help and Office



Attendance and penalty for missing classes

Requiring attendance is necessary for several reasons. First, you incorrectly assume you can catch up on a missed class by watching a recording (if available). Videos do not engage your brain as much as a live class. Second, less than 20% of you watch the recording (if available). You are then lost in class, which provides wrong signals to me as an instructor. Third, your absence hurts class discussions. Fourth, you miss out on feedback if you do not work through the questions I pose in class. Fifth, I lose the feedback since there are fewer questions.

The policy below will be in effect only after the add/drop period.

Without mandatory attendance, attendance is often below 50%. Therefore, though I dislike doing this, I penalize absences. If you anticipate being absent for good reasons, please email me well in advance. Please enter "Excused" on the attendance sheet described below to avoid the penalty if I approve. If you miss a class due to emergencies and cannot tell me in advance, do not panic. Take care of the emergency first, and then email me. I will permit you to change the "Absent" to "Excused." But, if you miss a class without a valid reason, there is a penalty, as stated below.

For sections meeting in 150-190 minute sessions, you will lose one grade (A to A-, A- to B+, B+ to B, B to B-, and so on) for EVERY missed session unless you were explicitly excused via email. Thus, if you miss two class sessions, you will lose two grades, and so on.

For sections meeting in 75-80 minute sessions, you will lose one grade (A to A-, A- to B+, B+ to B, B to B-, and so on) for EVERY TWO missed sessions unless you were explicitly excused via email. Thus, if you miss four class sessions, you will lose two grades, and so on.

Please sit in the same seat in every class and display your name tags. For Zoom classes, you must keep your video on AT ALL TIMES. You must also have a good working headset or mic, as it is extremely rude to be inaudible and force me to ask you to repeat yourself. After entering the class, please mark yourself present in the first 20 minutes on the OneDrive sheet (link posted on Brightspace). You will be marked absent if you are more than 20 minutes late unless it is because of factors beyond your control (traffic, subway, interviews running late). You will also be marked absent if you leave the class early unless you have my permission or get it afterward. You will get an F in the course if you are caught cheating on the attendance sheet.

Exams and Grading


There will be five class sessions of three hours each. The last session will be the final exam.

Class Topic
  • Accounting terms, transactions, and systems
    • Principal financial statements
    • Accruals versus deferrals
    • The logic of the double-entry bookkeeping systems
    • How the separation of duties is used to reduce fraud
  • Performance measures: Cash flows versus income flows
    • Accrued revenues or receivables
    • Deferred revenues or advances
    • Accrued expenses or payables
    • Deferred expenses or prepayments
  • Design of incentive systems
  • The core set of business transactions and how they affect the following statements:
    • Balance sheets
    • Income statements
    • Indirect cash flow statements
    • Direct cash flow statements
  • Costs versus expenses versus payments
    • Period costs versus inventoriable costs versus separately capitalized costs
    • Inventories: Raw materials, work in process, and finished goods
    • Cost flow assumptions: LIFO versus FIFO
  • Property, plant, and equipment: Gross PP&E, Accumulated depreciation, and Net PP&E
    • Which costs are capitalized
    • Useful life versus economic life versus physical life; Salvage values; Depreciation patterns
    • How depreciation of manufacturing equipment is inventoried
    • Gains and losses on the sale of PP&E
    • PP&E impairments
  • Time value of money, loans, and bonds
    • Simple versus compound interest
    • APR versus EAR
    • Loan amortization
    • Bonds: Principal versus face value, Coupons versus interest
    • Gains and losses on bond buybacks