Studying for the CPA exam

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#1 25 January, 2014 - 13:15
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Joined: 3 years 9 months ago

Studying for the CPA exam


Hello all,

The CPA exam is a four part test covering financial accounting concepts, business environment, tax and regulations, and auditing. At this point I am studying the very hardest of the four, Financial Accounting and Reporting, and the amount of material is voluminous. It naturally takes a lot of time, but I have the problem that I cannot remember the material when I need it.

I have software that I like to use for studying, and it breaks concepts down into small chapters (chapters 2-3 pages average each), but then the problems require you to make some well-thought applications of the principles. Sometimes there's just difficulty in remembering all the principles.

I'm a bit familiar with some of the methods around here, but what's best for absorbing numerous concepts while establishing logical connections between them all?

Any recommendations on a system that will help absorb concepts, remember them, allow making easy connections between facts, and then be able to apply them?

Ask whatever questions you must if I'm not clear. Thank you!

25 January, 2014 - 13:17
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PS - For those outside the U.S., CPA is Certified Public Accountant.

26 January, 2014 - 08:54
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Capriccio wrote:

Any recommendations on a system that will help absorb concepts, remember them, allow making easy connections between facts, and then be able to apply them?

For me, I try to memorize one concept at a time.
Then link from the image(s) I made for the concept.

In remembering the concept it helps obviously a lot in understanding it and embedding the concept into the knowledge you already have.

For example, let's assume for now that you are studying Sarbanes-Oxley.
It helps to know where that law came from and the way companies are using the law.
On the last part, it helps to know what business controls are and how they are used to mitigate risks.

Concepts belong in a framework where they are applied. Try to see the framework and then it will be easier to put the concept into it.

If you have an example of a concept that is giving you a hard time, I can try to be more specific on your studies.

27 January, 2014 - 17:24
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Joined: 3 years 9 months ago

Thank you for your reply Kinma. Yes, every principle belongs in a framework, and that is important for understanding and applying the principle.

What I am trying to discover is a good way to link all the concepts together using imagery. I can comprehend the material, but the problem is remembering it, or being able to recall it when I need it. If I don't tie it to something memorable, I will lose it and falter to get it when I need it most.

Adding to that, having a good system might give me peace of mind when I actually study the exam.

28 January, 2014 - 13:35
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Capriccio wrote:

If I don't tie it to something memorable, I will lose it and falter to get it when I need it most.

This is true. Treat this as a general principle.
Each concept needs to be tied to something memorable.
One way to do this is to take something special from a principle and link it to

Give me an example and I will explain how I will memorize it.

28 January, 2014 - 16:46
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Much appreciated Kinma! I think this will be enough.

Financial statement consolidation
- If a company owns more than 50% of the shares of another company, a parent-subsidiary exists, and the parent must consolidate the financial statements of the subsidiary with its own--that is, the parent must publish financial statements as though both entities were one single entity. The parent is free to account for the subsidiary on its book using whatever method it likes (either the cost or equity method), but the published financial statements must present both entities as one entity, regardless how the subsidiary appears on the parent's books.
- All intercompany transactions must be eliminated from the financial statements; that is, exchanges between the parent and subsidiary.
- A parent does not need to 100% own the subsidiary in order to consolidate the subsidiary, but it must do so if ownership is greater than 50%. If the parent owns less than 100% of the voting shares, the parent must account for noncontrolling interest in the financial statements (that is, other investors that own voting shares in the subsidiary).
- Extensive disclosure is also required if the parent acquired the subsidiary by a step acquisition (that is, previously owned shares in the company before acquiring over 50% of the subsidiary's voting shares).

29 January, 2014 - 07:00
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Ok, here goes.

Let's assume you don't know that consolidate is.
The con in consolidate comes from Latin (as cum-) and means 'with' or 'together'.
This makes sense in the context of the text, right?
Next part is solid.
The process of putting the 2 companies together; we take 2 statements together and make a solid one.

The 50% is an easy number to remember but for the sake of this example, let's use the Major System anyway.
50 = LS, so for an image, let's take a LaSso.
A lasso immediately brings up a cowboy and a bull, doesn't it?

Let's create the image. A cowboy is sitting on a horse. He takes his lasso and throws it over a bull.
The lasso falls on the ground. The cowboy pulls it, and the 2 legs of the bull are bound together by the lasso, effectively bringing the legs together or consolidating them (in a weird kind of way).

If you were to create this image, and on the exam you are asked with what percentage a company must consolidate, your brain will think about the word 'consolidate', you will see the 2 legs of the bull bound together from the LaSso, you will know that the exact percentage is 50.

It is a long story to write, but if you do this and if you get some proficiency in doing this, this will take up almost no time.

31 January, 2014 - 16:19
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Joined: 3 years 9 months ago

Thank you Kinma!

27 May, 2014 - 18:04
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Kinma wrote:

Ok, here goes.

Let's assume you don't know that consolidate is.
The con in consolidate comes from Latin (as cum-) and means 'with' or 'together'.
This makes sense in the context of the text, right?
Next part is solid.
The process of putting the 2 companies together; we take 2 statements together and make a solid one.

The 50% is an easy number to remember but for the sake of this example, let's use the Major System anyway.
50 = LS, so for an image, let's take a LaSso.
A lasso immediately brings up a cowboy and a bull, doesn't it?

Hej Kinma! Thank you for sharing with us how you would remember consolidation and linking 50% into that image.
However, that seems to be the easy part. How would you put the rest of the information in the / a story?? ;

If a company owns more than 50% of the shares of another company, a parent-subsidiary exists, and the parent must consolidate the financial statements of the subsidiary with its own--that is, the parent must publish financial statements as though both entities were one single entity. The parent is free to account for the subsidiary on its book using whatever method it likes (either the cost or equity method), but the published financial statements must present both entities as one entity, regardless how the subsidiary appears on the parent's books.
- All intercompany transactions must be eliminated from the financial statements; that is, exchanges between the parent and subsidiary.
- A parent does not need to 100% own the subsidiary in order to consolidate the subsidiary, but it must do so if ownership is greater than 50%. If the parent owns less than 100% of the voting shares, the parent must account for noncontrolling interest in the financial statements (that is, other investors that own voting shares in the subsidiary).
- Extensive disclosure is also required if the parent acquired the subsidiary by a step acquisition (that is, previously owned shares in the company before acquiring over 50% of the subsidiary's voting shares).

28 May, 2014 - 02:19
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Hinky wrote:

How would you put the rest of the information in the / a story?? ;

Here is how I would do this. First I concentrate the information, thus:

1: If ownership is more than 50% =>consolidate into one entity.
2: "All intercompany transactions must be eliminated".
This follows automatically from the 'consolidate into one entity' provision from the previous step.
In other words this part is redundant. So I skip this.
3: The first part " A parent does not need to 100% own the subsidiary in order to consolidate the subsidiary, but it must do so if ownership is greater than 50%" is the same as step 1 and therefore redundant.
The only new information is: "If the parent owns less than 100% of the voting shares, the parent must account for noncontrolling interest in the financial statements".
I translate this to: >50% AND <100% => account for non-controlling interest.
4: "Extensive disclosure is also required if the parent acquired the subsidiary by a step acquisition".
I translate this to: > 50% => extensive disclosure.

In short:
>50% =>consolidate into one entity.
>50% AND <100% => account for non-controlling interest.
> 50% => extensive disclosure.

The first and the last can be merged into:
>50% =>consolidate into one entity AND extensive disclosure.

The whole story is now consolidated into:
>50% =>consolidate into one entity AND extensive disclosure.
>50% AND <100% => account for non-controlling interest.

Now let's link this to the existing story.
There are 100's of ways of doing this. Here is one.
The LaSso stands for 50%. So the lasso needs to catch 2 things; the image for 'consolidation' and the image for 'extensive disclosure'.

I leave the last item to your imagination.

10 January, 2015 - 11:05
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Upon finding this thread again I thought I would do some follow-up. Here are some observations on what has worked for me.

First, for a beginner in mnemonics such as myself there is too much material per section of the CPA exam to put a memory trigger to every jot and tittle. If you're a beginner as I am you run the risk of making the mnemonic so complicated that it takes more to remember the mnemonic than it does the material it was supposed to help you remember. But that's precious time going down the drain. Using the software I purchased for review I first ran through all the practice questions, and in my reviews I am using mnemonics for concepts that were obscure or am likely to forget. I decide on mnemonic-worthy material based on which review questions have proved most difficult for me, or what I am most likely to forget. Hey, why use a mnemonic for something you already know?

The next step is figuring out a proper mnemonic. I decided to use the Loci method, and I chose the Fountain Place tower in downtown Dallas, TX. Outside the tower I have Joseph Stalin holding two fishing nets while smoking a cigar, which I use to remember macroeconomic principles (not that I think he makes a good economist... and I will not be discussing politics in this thread).
- The cigar is how I remember that Consumption + Investment Spending + Government Spending + Net Exports is the expenditures approach to aggregate Gross Domestic Product.
- I watch one end of the cigar fall off, which to me represents the allowance for capital consumption, I have Net Domestic Product.
- I chose Stalin because there is another way to calculate GDP called the Income Approach. It begins with national income, which is calculated by Salaries + Rents + Interest + Proprietary/Partnership Income + Corporate Income. A mnemonic to remember that formula is Stalin's Red Influence Promoted Communism.
- "I Bought Two Nets For Fishing Income." Another mnemonic to help you remember that you must add Indirect Business Taxes + Net Foreign Factor Income to get Gross Domestic Product using the income approach.

That's one mnemonic, and it encompasses a handful of needed material, but because I knew a few mnemonics already from my study material and I was able to think of this loci imagery quickly I just had to picture Stalin in front of the Fountain Place tower with his two fishing nets.

That's enough for now, but key point is I had to know when to use the mnemonic techniques, and when not to use them because of time and capacity constraints. Being a beginner I can't make the applications of the techniques that others can, but I can at least make some. Mnemonics aren't the magical solution for passing the exam, but they are definitely useful. No doubt I'll get better with time too. Very thankful for this site.

10 January, 2015 - 15:34
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Joined: 5 years 1 month ago

Thanks for the update and great to see how you handled learning this information.
Did you pass the CPA exam?

10 January, 2015 - 16:02
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Joined: 3 years 9 months ago

I passed two parts--one in August and one in November. I missed the third part by one point (ach!). I am taking one section next Saturday, and taking the failed section in February. I expect I will be done then.

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