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A Two Headed Monster Named Intermediate Accounting

So you cleared Principles of Accounting and you are now ready to take on the double headed monster known as Intermediate Accounting. Intermediate Accounting is the only two-semester course sequence that you have to go through in order to obtain your bachelor of science in accounting. Because of the depth and breadth of the topics covered in a typical Intermediate Accounting course, I gave it a nick name: The Two Headed Monster. I also came up with a nick name for Auditing but it will be revealed when I write a post on the auditing course. For now, just do yourself a favor by accepting de facto that intermediate accounting is going to test your resolve. Going through the two semester course sequence is often a very labor intensive process. You will need to devote 10 to 15 hours a week digesting what you will be taught in the classroom. The purpose of intermediate accounting is to help you understand, prepare, and use financial information. Most of your understanding of financial accounting and reporting will take place during the two semesters you will devote to this course. I often wonder why they call this course Intermediate Accounting as apposed to Applied Financial Reporting which seems to be a more suggestive appellation. Rather than debating on what would be the most appropriate name for Intermediate Accounting, you will be better served if I forewarn you about the most challenging topics that you will likely encounter while taking this two-semester course sequence of accounting. The following is a list of topics that I have personally found very difficult to assimilate. Please be mindful that this list is not intended to be exhaustive nor universal.

I) Conceptual Framework Underlying Financial Accounting: (1)Basic assumptions of accounting: Economic entity, Going concern, Monetary unit, and periodicity. (2)Application of the basic principle of accounting:Historical cost principle, Revenue recognition principle, Matching principle, and Full disclosure principle. (3)Impact of constraints on the reporting of accounting information: Cost benefit relationship, materiality, industry practices, and conservatism.

II) Income Statement and Related Information: Reporting irregular items, Discontinued operations, extraordinary items, unusual gains and losses, Change in accounting principle, Change in accounting estimate, Special reporting issues, and Intra-period tax allocation.

III) Cash Flows Statement: Content and format of the statement of cash flow, Preparation of the statement of cash flows, Classification of cash flows, and Sources of information.

IV) Accounting and the Time Value of Money: Single sum problems, Annuities, Valuation of long term bonds, and Present value measurement.

V) Cash and Receivables: Valuation of accounts receivable, Recognition of notes receivable, Valuation of notes receivable, Disposition of accounts and notes receivables.

VI) Inventory: Effects of inventory errors on the financial statements, Cost flow assumptions, Special issues related to LIFO, and Lower of cost or market.

VII) Acquisition, Valuation, and Disposition of Property, Plant, and Equipment: Pick your poison!

VIII) Depreciation, Impairment, and Depletion: Pick your poison!

IX) Characteristics, Valuation, Amortization, and Impairment of Intangible Assets: Pick your poison!

X) Long Term Liabilities: Issuance and Valuation of Bonds (Discount and Premium), Effective interest method, Cost of issuing bonds, Issuance and valuation of long term notes payable, Extinguishment of debt, Trouble debt restructuring, and Off balance sheet financing.

XI) Stockholder’s Equity: Accounting for and reporting treasury stock, Dividend policy, Dividend preferences, and Book value per share.

XII) Dilutive Securities and Earnings per Share: Accounting for the issuance, conversion, and retirement of convertible securities, Accounting for stock warrants, Accounting for stock compensation plans under GAAP, and Computing earnings per share in both simple and complex capital structure.

XIII) Investments: Held to maturity securities, available for sale securities, trading securities, and Investments in equity securities.

XIV) Revenue Recognition: At point of sale, Percentage completion method, Completion of production basis, Installment sales accounting method, Cost recovery method, Accounting for losses on completed contract, and Bargain purchases.

XV) Accounting for Income Taxes: Pick your poison!

XVI) Accounting for Pensions and Retirement Benefits: Pick your poison!

XVII) Accounting for Leases: Pick your poison!

XVIII) Accounting Changes and Error Analysis: Pick your poison! Have you caught your breath yet?

It was indeed a very lengthy list and it could get shorter or lengthier depending on your personal situation. Because both Intermediate Accounting courses will be very time consuming, having access to very well written lecture notes will save you quite a good amount of time on your preparation before each lecture. Trust me, you will be so swamped with waves of new information pouring over your head that you will start looking for new time efficient ways of studying for Intermediate Accounting. Luckily for you, I have been down that road before. I took Intermediate Accounting about two years after taking Principles of Accounting. Not only did I have to contend with being a little rusty, but I also had to deal with taking a full course load and keeping busy with extra curricular activities. You can imagine how much juggling I had to do just to make sure that I never fell behind throughout the semester. Actually, I did occasionally fall behind but I would always find some innovative ways to catch up within no time. For instance, I relied heavily on free lecture notes available on the internet. In addition, whenever there was an accounting concept that puzzled me, I would look it up on Google or Wikipedia to see if I could find some easier to understand definition and illustration of that concept. Last but not least, I would always seek additional explanation from my classmates and most importantly from my accounting professors. Regardless of your personal circumstances, it’s important that you always remind yourself that a true understanding of how a particular accounting procedure is applied demands a clear understanding of why it is applied.

PS: Now proceed to the “Accounting Lecture Notes” page for some study aids related to Intermediate Accounting.


  1. Comment by Charles Woods:

    The title on this one brought back memories. haha. My Intermediate classes were some of the toughest classes I have taken.

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