What's in Financial Accounting: All 16 Units Mapped

Financial accounting is the course that teaches how a business records what happened to it and reports the result to outsiders: investors, lenders and regulators. It is less about math than people expect and more about a fixed set of rules applied consistently. Encodr's free Financial Accounting course follows OpenStax Principles of Accounting, Volume 1, chapter by chapter, using US GAAP throughout. It has 16 units, 79 chapters and 1,217 study cards drawn from 17 sources, and each chapter opens with a note card that teaches the topic before the questions start.

Here is what each unit covers, in the order the course teaches it.

Foundations: what accounting is for (units 1-2)

Unit 1, Role of Accounting in Society (4 chapters, 55 cards). Financial versus managerial accounting, internal and external users, the three kinds of for-profit business (manufacturing, merchandising, service), and who sets the rules: FASB for US GAAP, GASB for state and local governments, IASB for IFRS, with the SEC and PCAOB overseeing public companies. It also covers sole proprietorships, partnerships and corporations, and the main credentials (CPA, CMA, CIA and others). This unit is almost all vocabulary.

Unit 2, Introduction to Financial Statements (4 chapters, 75 cards). The four statements and the order you prepare them in: income statement, statement of owner's equity, balance sheet, statement of cash flows. The accounting equation (Assets = Liabilities + Equity), the difference between revenues and gains, cash versus accrual basis, and the first two liquidity measures, working capital and the current ratio.

The recording machine (units 3-5)

These three units are the core of the course. Everything after them reuses the same mechanics.

Unit 3, Analyzing and Recording Transactions (7 chapters, 113 cards). GAAP principles (revenue recognition, matching, cost, conservatism), the expanded accounting equation, debit and credit rules, normal balances and T-accounts, journal entries, posting to the general ledger and the unadjusted trial balance. If one unit decides how the rest of the semester goes, it is this one. Debits and credits explained walks through the rules with balanced entries.

Unit 4, The Adjustment Process (7 chapters, 114 cards, the largest unit). Why accrual accounting needs adjusting entries, then the four families: prepaid expenses, unearned revenue, accrued expenses and accrued revenue, plus the first depreciation entry and the adjusted trial balance. Every adjusting entry pairs one balance sheet account with one income statement account, and cash never appears in one.

Unit 5, Completing the Accounting Cycle (5 chapters, 94 cards). The ten-step accounting cycle, the four closing entries, the post-closing trial balance, optional reversing entries, the classified balance sheet and the quick ratio.

Merchandising, systems and controls (units 6-8)

Unit 6, Merchandising Transactions (5 chapters, 75 cards). A business that buys and resells goods: perpetual versus periodic inventory, purchase and sales entries with returns and discounts (terms like 2/10, n/30), FOB shipping point versus FOB destination, and the multi-step income statement with gross profit.

Unit 7, Accounting Information Systems (3 chapters, 38 cards, the smallest unit). Source documents, special journals (sales, purchases, cash receipts, cash disbursements), subsidiary ledgers and control accounts.

Unit 8, Fraud, Internal Controls and Cash (4 chapters, 56 cards). The fraud triangle, COSO's five components of internal control, separation of duties, the Sarbanes-Oxley Act, petty cash and the bank reconciliation.

Units 7 and 8 are lighter on calculation and heavier on terms and lists. The bank reconciliation is the one procedure to drill.

Assets, one class at a time (units 9-11)

Unit 9, Accounting for Receivables (5 chapters, 77 cards). The five-step revenue recognition model, the direct write-off and allowance methods for bad debt, estimating bad debt by percentage of sales or by ageing receivables, notes receivable with interest, and receivables turnover.

Unit 10, Inventory (6 chapters, 96 cards). Specific identification, FIFO, LIFO and weighted average, under both periodic and perpetual systems, then lower of cost or net realizable value, inventory errors and inventory turnover. This is the first heavily computational unit.

Unit 11, Long-Term Assets (7 chapters, 92 cards). What to capitalize versus expense, the full cost of an asset, straight-line, units-of-production and double-declining-balance depreciation, partial years and revised estimates, disposals with gains and losses, depletion, amortization and goodwill.

Liabilities and equity (units 12-15)

Unit 12, Current Liabilities (4 chapters, 59 cards). Accounts payable, sales tax, unearned revenue, short-term notes with interest, payroll liabilities and contingent liabilities (when to record, when to disclose only).

Unit 13, Long-Term Liabilities (5 chapters, 79 cards). Instalment notes, then bonds: face value, stated versus market rate, issuing at par, a premium or a discount, and amortizing the difference by the straight-line and effective-interest methods. The course gives every bond price rather than asking you to compute one by present value. To see why a bond priced below face pays more than its stated rate, try a discount price in the bond yield calculator, which shows current yield and approximate yield to maturity.

Unit 14, Corporation Accounting (5 chapters, 83 cards). Classes of stock, par value, issuing stock with additional paid-in capital, treasury stock, cash and stock dividends, stock splits, retained earnings and earnings per share.

Unit 15, Partnership Accounting (3 chapters, 43 cards). Forming a partnership, dividing income with salary allowances and ratios, admitting and withdrawing partners, and liquidation.

Cash flows (unit 16)

Unit 16, The Statement of Cash Flows (5 chapters, 68 cards). Operating, investing and financing activities; the indirect method (start from net income, add back depreciation, adjust for changes in working capital); the direct method; and free cash flow. It is the capstone because it pulls numbers from both the income statement and two balance sheets at once.

Which units are math-heavy and which are memory-heavy

The math never goes past arithmetic and percentages. What makes it hard is setup: which number goes where, and which account gets debited. Most cards in the calculation units are worked problems (typed or multiple choice) whose answers were recomputed by script, and every journal entry card balances. Cards are text only, so statements and T-accounts are described in words.

For the memory-heavy units, a single comparison table per unit works better than rereading; how to memorize a list, a table or a formula sheet has the method.

How it connects to other courses

Accounting is usually taken alongside or right after economics. Microeconomics uses accounting profit as its starting point before subtracting implicit costs, which what's in Principles of Microeconomics maps out. Macroeconomics applies a similar bookkeeping idea to a whole country through GDP and national income accounting; see what's in Principles of Macroeconomics.

The course is also cumulative in a way few intro courses are: unit 16 needs units 3, 4, 11 and 14 all at once. Studying for a cumulative final vs a unit test explains how to keep old units alive, and how to study for Financial Accounting turns that into a semester plan for this course specifically.

Financial Accounting is one of several intro courses Encodr offers for free; the list of free college gen-ed course flashcards has the rest. To start this one, open the free financial accounting flashcards.