Too much information can be a distraction.
Studying for the CPA exam requires hundreds of hours of time, so the tools you use to study can make a huge difference in your exam results. Given the sheer volume of information on the web, it can be difficult to plow through all the data that is available and find the most effective study tools. While just about every CPA candidate purchases some sort of review course or book, there are other tools out there that can really help you study. Consider using these tools to study for the CPA exam.
There are many finance concepts on the CPA exam, and if you’re unsure about any of those concepts, do a search on Investopedia. This site presents topics clearly and the site is visually appealing.
Accounting for a premium bond is a good example. Bonds are normally issued at a face amount (par amount) of $1,000, and in multiples of $1,000. When a bond is selling at a premium, the price is higher than $1,000. Since the investor only gets $1,000 in principal at maturity, why would anyone pay more than $1,000 and take a loss when the bond matures? One reason is because the coupon (interest) rate paid on the bond is higher than interest rates on bonds currently being issued. This Investopedia link explains premiums on bonds. Give this site a try.
Present value and future value tables
If an accountant needs to calculate the present value or the future value of an investment, there are a dozen calculators you can find online. At the risk of sounding like a cranky old man, I think you should work some problems using present and future value tables. By looking at the table, you’ll see some trends that will help you understand these concepts.
Consider the present value table for a single sum using a 5% inflation rate, for example. The present value of a dollar received in one year is .9524, and a dollar received in five years is worth .7835 today. Well, that should make sense because the farther you go out in time, the less valuable one dollar becomes. Put another way, the dollar is worth about 95 cents in a year and about 78 cents in five years, given a 5% inflation rate. I don’t think that CPA candidates can really nail down this concept, unless they look at a present value table.
Your old textbooks
Dust off your accounting textbooks because each textbook has some pages that are really valuable as you study for the CPA exam. When I taught an undergraduate financial accounting course, I always told students to mark the pages that explained debits, credits, and double-entry accounting. Every financial accounting textbook also explains how the books are closed at the end of each month. Because each textbook is revised periodically, the authors have refined how they explain these concepts. Best of all, you learned these concepts using the textbook examples! Use them again for the CPA exam.
There is a lot of accounting material out there. Use these tips to find the best resources, so you can study effectively and pass the CPA exam.
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