Day 34 in MIT Sloan Fellows Class 2023, Financial Accounting 1
We study GAAP which is an accounting standard in the US.
FASB set this standards and SEC enforces them.
Course Agenda
We learn the following concepts in our class.
- Fundamental of accounting system
- BS/IS/CF
- Revenue recognition( Deferred revenue )
- Receivable and bad account allowance
- Inventory(FIFO LIFO)
- Depreciation
- Goodwill
It is basic staff, but it is really great exercise for people who don't any accounting experience.
Deferred Revenue and Allowance for Doubtful accounts
What I was really interested in is DR and ADA seem to be a double standard.
When a company record DR, it can't record any revenue because it needs to complete the obligation of service or item delivery. So in other words, we can't record future revenue.
However, ADA is recorded as soon as a company recognizes the risk of default. Then, it needs to record the expense. However, actually, it is the future expense.
This is why I felt the accrual method is a bit tricky.
