In our first series of articles, we’ll discuss ten concepts that students often struggle with before they decide to work with a tutor for CPA-FAR. Each post will offer guidance on how to prepare to master the topic or concept discussed. In this initial post, we’ll cover governmental and non-profit accounting.
First, let’s cover some basics. As you probably know, the CPA exam is split into four tests:
- Financial accounting and reporting (FAR)
- Auditing and attestation (AUD)
- Business environment and concepts (BEC)
- Regulation (REG)
FAR tests the financial accounting and reporting framework used by business enterprises, not-for-profits, and government entities. To pass, you’ll have to both demonstrate knowledge and understanding of accounting principles and show that you can apply your knowledge to perform the tasks required of a certified public account.
These tasks include, for example, the ability to:
- Differentiate between financial statements prepared under U.S. Generally Accepted Accounting Principles (GAAP) vs. those prepared under International Financial Reporting Standards (IFRS)
- Calculate amounts for financial statement components
- Reconcile ledgers
- Prepare financial statement notes
FAR is generally considered one of the easier exams, because every topic on the FAR exam should have been covered in an intermediate accounting course, including Governmental and non-profit accounting.
However, it is very easy for Governmental and non-profit accounting to get flagged as less important or fall through the cracks in the spring semester of your senior year and become a total shock when it appears as a heavily tested topic on the FAR exam.
So, aside from governmental and non-profit accounting being a less-intuitive topic, students seem less prepared for it (on average). For those that struggle with this section of their exam review, here’s a quick guide on how to prepare for it:
Step 1: review the governmental and non-profit accounting section first, before any other topic!
The FAR exam is divided into 9-10 sections (depending on the CPA study software one uses) and governmental and non-profit accounting is always a stand-alone section. The exam questions in this section test memorization as opposed to logical thought processes. Therefore, it’s best to master this section in the week leading up to the exam and not allocate too much time to it on the front end. That said, there is tremendous value in reviewing this section prior to working through any other section. A quick review of this section upfront will make it easier to master this section in the week leading up to the exam. So, take the time to read through each sub-section, watch videos that are provided with the software, and take a quick test (5-10 questions) at the end of each sub-section, then move on! That last part is key. The point of this initial review is not to master the section but to get exposed to the breadth of the material covered.
Step 2: work through and master all the other sections
The 8-9 other sections of the FAR exam should be extremely familiar to most students. These sections are much more intuitive than governmental and non-profit accounting, and were the bread and butter of intermediate accounting courses. Therefore, students should focus on tackling each of these sections one by one and mastering them in a final review before even taking a second look at governmental and non-profit accounting! (by master, I mean scoring over 75% on all practice tests). Once the student feels comfortable with all the sections, then it’s time to move back to governmental and non-profit accounting.
Step 3: master the governmental and non-profit accounting section
This is the time to dig in! If you have managed your time correctly, you should be no more than a week from your exam date. A couple days should be spent re-reading the subs-sections, and re-watching videos on governmental and non-profit accounting. After each sub-section, the student should take practice tests in order to gauge strengths and weaknesses. Any weaknesses should be addressed by re-reading those topic areas, re-watching videos, searching for additional resources online, and working with a tutor. Flash cards are also incredibly helpful for this section as the exam questions test memorization as opposed to logical through processes. Like all the other sections, the student should be mastering this material by the end of their review. If time has been managed appropriately, the student should have no more than two days before the exam for any final touch-ups after mastering governmental and non-profit accounting.
Like all the other sections, the student should be mastering this material by the end of their review. If time has been managed appropriately, the student should have no more than two days before the CPA-FAR exam for any final touch-ups after mastering governmental and non-profit accounting.