Full first-year accounting course

What a student will be able to do

• Say who uses a company's financial information and why - owners, lenders, managers, tax offices - and name who writes the rules and who checks that they are followed.
• Tell apart the three ways a business can be set up: one owner, a partnership, or a company.
• Use the basic words of accounting, and spot when a business breaks a ground rule - for example, showing an asset at today's market price instead of what was paid for it.
• Explain what the accounting equation (Assets = Liabilities + Equity) really means, and work out any missing part of it.
• Decide whether an event is a real transaction, then work out which accounts change, in which direction, and by how much.
• Build and read the main financial statements, and follow how profit moves into the owners' share and then onto the balance sheet.
• Judge how much a business can safely pay out to its owners, and make an honest choice when the easy answer is the wrong one.

The games that teach it — 25 in this chapter

What a student will be able to do

• Explain what debit and credit really mean - left side and right side, not good and bad - and name the normal side of any account.
• Use T-accounts (a simple two-sided page for one account) to place both halves of an entry and work out the account's balance.
• Write a journal entry in the correct format, and build complete entries on your own, including ones that touch more than two accounts.
• Build a trial balance (a list of every account balance) and explain why the two columns must add up to the same total.
• Find the errors a trial balance catches - and the ones it hides - then write the entry that fixes them.
• Work through the whole recording process from first entry to finished trial balance, and connect that trial balance to the financial statements.

The games that teach it — 15 in this chapter

What a student will be able to do

• Explain the difference between accrual accounting (record it when it happens) and cash accounting (record it when the money moves), and work out the profit under each.
• Adjust for money that moved early: rent and insurance paid in advance, supplies used up, and work a customer has paid for but not yet received - and spread the cost of equipment over its useful life (depreciation).
• Adjust for money that has not moved yet: wages owed, interest owed, and work finished but not yet billed to the customer.
• Post the adjustments to the accounts and build an adjusted trial balance, showing that the two columns still match.

The games that teach it — 27 in this chapter

What a student will be able to do

• Close the temporary accounts at year-end so revenue, expenses, and dividends start the new year at zero.
• Prepare a post-closing trial balance that lists only the accounts carried forward into the next year.
• Build a classified balance sheet that separates short-term items from long-term ones, then compute working capital and the current ratio and say what they tell you.
• Put the nine steps of the accounting cycle in order, and say which ones happen during the year and which happen at the end.
• Prepare an income statement from the adjusted trial balance, then follow the profit through to retained earnings and on to the balance sheet.

The games that teach it — 21 in this chapter

What a student will be able to do

• Tell the difference between a business that buys and resells goods and one that sells a service, and explain why only the first one has a cost of goods sold.
• Record a purchase of goods for resale, including the shipping cost paid by the buyer, goods sent back to the supplier, and a discount for paying early.
• Read the delivery terms on an invoice and say who owns the goods while they are travelling and who pays the shipping.
• Record every sale in two steps: the money earned from the customer, and the cost of the goods that left the shelf.
• Handle customer returns, price reductions given to customers, and discounts for customers who pay early.
• Build a multi-step income statement that shows net sales, gross profit, operating income, and net income in the right order.
• Work out the gross profit margin and the profit margin, and say what it means when either one goes up or down.

The games that teach it — 35 in this chapter

What a student will be able to do

• Decide which goods belong to the business at the end of the year, including goods still in transit and goods held on behalf of someone else.
• Work out the cost of goods sold and the value of goods still on hand using FIFO (first-in, first-out, so the oldest goods are treated as sold first), LIFO (last-in, first-out, so the newest goods are treated as sold first), and weighted average.
• Explain how each of these methods changes profit when prices are rising and when prices are falling.
• Report goods at the lower of what they cost and what they can now be sold for, and record the write-down when the value has dropped.
• Follow a counting or costing mistake through cost of goods sold, gross profit, and net income, and show how it corrects itself the next year.
• Work out inventory turnover and days in inventory, and say what a higher or lower figure tells you about the business.

The games that teach it — 22 in this chapter

What a student will be able to do

• Explain what internal control is - the rules and checks a business uses to protect its assets and keep its records honest.
• Name the three things every fraud needs: a reason, a chance, and an excuse.
• Match a business situation to the control rule it follows or breaks, such as keeping record-keeping and cash-handling in different hands.
• Find the weak point in a company's controls and choose the fix for it.
• Prepare a bank reconciliation that brings the company's own cash record and the bank statement to the same true cash balance.
• Record journal entries only for the items the company did not yet know about, and leave the bank's own items alone.
• Run a small petty cash fund: set it up, refill it, and deal with cash that is short or over.
• Decide whether an item counts as cash, a cash equivalent (a safe investment that turns into cash within 90 days), or neither.

The games that teach it — 21 in this chapter

What a student will be able to do

• Tell the difference between an account receivable (ordinary short-term credit given to a customer) and a note receivable (a written promise to pay, usually with interest).
• Estimate how much customer debt will never be collected, either as a percentage of credit sales or from an aging table that groups debts by how old they are.
• Record the year-end estimate for bad debts and work out the amount the business really expects to collect.
• Write off a customer who cannot pay, and show why this does not change profit.
• Record the two steps needed when a customer who was written off pays after all.
• Work out interest on a note from the amount lent, the rate, and the time, and record it as it is earned.
• Record a note that is collected on time, and one that the customer fails to pay on the due date.
• Work out how many times a year the business collects its debts and how many days each collection takes.

The games that teach it — 22 in this chapter

What a student will be able to do

• Work out the full cost to record a long-term asset, including delivery, installation, and testing to get it ready for use.
• Decide whether a later cost is added to the asset or treated as an expense straight away, and remember that land is never depreciated.
• Spread the cost of an asset over its useful life three ways: straight-line (the same amount each year), double-declining-balance (more in the early years), and units-of-activity (an amount for each unit the asset produces or each kilometre it travels).
• Work out book value, charge only part of a year when an asset is bought or sold mid-year, and redo the figures from today onward when an estimate changes.
• Record the sale or scrapping of an asset and work out the gain or loss on it.
• Classify intangible assets such as patents, copyrights, trademarks, and goodwill, and spread the cost of the ones with a limited life.
• Explain why goodwill is never written off a little each year, but is instead tested each year to see if its value has fallen.
• Work out fixed asset turnover and say what a higher figure tells you about how well the assets are being used.

The games that teach it — 24 in this chapter

What a student will be able to do

• Spot a current liability (something the company must pay within one year) and tell it apart from a long-term debt.
• Work out the interest on a short-term loan, and record the loan from the day it starts to the day it is paid back.
• Record sales tax correctly - it is money collected for the government, never a cost of the business.
• Record money received before the work is done, such as a customer deposit or a gift card, and show it as earned later.
• Decide when a possible future cost, such as a lawsuit, must be recorded, only mentioned in a note, or ignored.
• Record the cost of a warranty (a promise to repair a product) at the time of the sale, not when the item breaks.
• Work out an employee's take-home pay from their total pay, and record the extra taxes the employer must pay on top.
• Calculate the current ratio (current assets divided by current liabilities) and say what it tells you about paying short-term bills.

The games that teach it — 25 in this chapter

What a student will be able to do

• Explain what a bond is (a loan a company sells to investors in small pieces) and name its main terms.
• Compare borrowing money with selling shares, and say why a company might choose one way over the other.
• Decide whether a bond sells at face value, below it (a discount) or above it (a premium) by comparing the two interest rates.
• Record the sale of a bond, then spread the discount or premium evenly across the years until the bond is repaid.
• Split each payment on a long-term loan into two parts - interest, and repayment of the amount borrowed - and build the payment schedule.
• Work out interest expense using the effective-interest method, where the amount is recalculated every period.
• Record the end of a bond, both on its due date and when the company buys it back early at a gain or a loss.
• Calculate debt-to-assets and times-interest-earned, two simple checks on how safely a company carries its debt.

The games that teach it — 22 in this chapter

What a student will be able to do

• Explain how a corporation works, including limited liability (owners are not personally responsible for the company's debts).
• Record the sale of shares to investors, both at par value (a small legal amount printed on the share) and above it.
• Tell common shares apart from preferred shares, and count shares that are authorized, issued and outstanding.
• Record a cash dividend at each step, from the day it is announced to the day the cash is paid out.
• Work out how much of a dividend goes to preferred owners first, including payments missed in earlier years.
• Explain the difference between a stock dividend and a stock split, and show what each one does to total equity.
• Record treasury stock - shares the company buys back from its own investors - and what happens when it sells them again.
• Build the owners' equity part of the balance sheet in the correct order, and calculate earnings per share and return on equity.

The games that teach it — 22 in this chapter

What a student will be able to do

• Sort each transaction into operating (running the business), investing (buying or selling long-term items) or financing (owners and lenders).
• Handle the tricky cases, such as interest paid counting as operating while dividends paid count as financing.
• Start from net income and adjust it, step by step, to find the cash the business actually made from operating.
• Apply the golden rules: a change in a current asset moves cash the opposite way, and a current liability the same way.
• Work out the real cash received when a long-term asset is sold, using its book value plus a gain or minus a loss.
• Build the full statement of cash flows and prove that it explains the move from opening cash to closing cash.
• Show deals that used no cash, such as buying land by signing a loan note, in a separate note below the statement.
• Calculate free cash flow (operating cash left after paying for equipment) and simple ratios that test cash against debt.

The games that teach it — 20 in this chapter

What a student will be able to do

• Compare a company with itself over several years using horizontal analysis (the percentage change from one year to the next).
• Turn a statement into percentages using vertical analysis, so that companies of very different sizes can be compared fairly.
• Calculate liquidity ratios, including the quick ratio, to judge whether short-term bills can be paid on time.
• Calculate activity ratios that show how quickly inventory sells and how quickly customers pay what they owe.
• Calculate profitability ratios, such as return on assets and return on equity, to see how hard the invested money is working.
• Calculate solvency ratios, such as debt-to-equity, to judge how heavily a company depends on borrowed money.
• Calculate investor ratios - price-earnings, payout, dividend yield and book value per share - and break return on equity into its three drivers.
• Explain why a single ratio means little on its own, and judge earnings quality when accounting choices change the numbers.

The games that teach it — 20 in this chapter

What a student will be able to do

• Name a factory's three inventories (materials, work in process and finished goods) and follow its costs all the way to cost of goods sold.
• Tell a product cost from a period cost, and split product costs into direct materials, direct labor and factory overhead.
• Compute a predetermined overhead rate, apply overhead to a job, build a job cost sheet, and say whether overhead was overapplied or underapplied.
• Prepare a schedule of cost of goods manufactured.
• Classify costs as fixed, variable or mixed, and say what happens to total cost and to cost per unit when the volume changes.
• Prepare an income statement with contribution margin, and find the break-even point and the sales needed for a target profit.
• Prepare a simple monthly cash budget.

The games that teach it — 10 in this chapter