KAT301 - Pre-requisite for enrollment in ACCT301
Intermediate Accounting I (ACCT 301)
Foundational Financial Accounting Knowledge Assessment Tool (KAT301)
Students wishing to enroll in ACCT 301 MUST pass a test of their knowledge of financial accounting. Students will have the opportunity to take the test prior to each semester The following provides a brief FAQ on the KAT301 and a more detailed description of the rationale for the test, details on administration of the test, the knowledge assessed and resources available for students preparing for the test.
KAT301 Frequently Asked Questions
Intermediate Accounting I is an important and demanding foundational course for all accounting majors. Across U.S. accounting programs, students find the adjustment to the rigor of Intermediate Accounting a stressful and challenging experience. In many universities the failure rate in this class can range from 30-50%. Success in Intermediate Accounting I (and subsequently Intermediate Accounting II) requires a strong foundational understanding and competency in financial accounting theory, concepts and techniques covered in introductory or principles of financial accounting classes. Without this strong foundational knowledge and a significant time commitment to the course, students are setting themselves up for failure. Successful completion of the course results in development of study habits and the foundational knowledge vital to the remaining accounting courses, certification exams and a rewarding career in the accounting profession. The importance of this course for accounting majors is why many accounting professionals look for the grade in Intermediate I when considering what students to hire in their business organization. Given the importance of this course and the growing restrictions on funding of accounting education, many accounting programs have instituted limits on the number of times accounting students can fail the course before admission as an accounting major and/or entrance exams for enrollment in the Intermediate Accounting I course. A few years ago CSUSM introduced such a restriction; students admitted to the accounting option must pass Intermediate Accounting I (ACCT 301) on or before the third attempt (including withdrawals). The Department of Accounting now requires students enrolled in ACCT 301 to pass an assessment of their knowledge of financial accounting theory, concepts and techniques covered in introductory or principles of financial accounting classes. Academic research and anecdotal evidence indicates a strong relationship between the level of this knowledge and student success in the Intermediate Accounting I class.
Content of KAT301
KAT301 will test student knowledge of the following financial accounting theory, concepts and techniques:
- Explain what accounting is.
- Identify the users and uses of accounting.
- Explain the following assumptions: monetary unit, economic entity, going concern, and time period/periodicity.
- Explain the following principles: cost, matching, revenue recognition and materiality
- State the accounting equation and define its components.
- Analyze the effects of business transactions on the accounting equation.
- Understand the four financial statements and how they are prepared.
- Explain what an account is and how it helps in the recording process.
- Define debits and credits and explain their use in recording business transactions.
- Identify the basic steps in the recording process.
- Explain what a journal is and how it helps in the recording process.
- Explain what a ledger is and how it helps in the recording process.
- Explain what posting is and how it helps in the recording process.
- Prepare a trial balance and explain its purpose.
- Explain the accrual and cash approaches to accounting.
- Explain the reasons for adjusting entries.
- Identify the major types of adjusting entries.
- Prepare adjusting entries for deferrals.
- Prepare adjusting entries for accruals.
- Describe the nature and purpose of an adjusted trial balance.
- Explain the process of closing the books.
- Describe the content and purpose of a post-closing trial balance.
- State the required steps in the accounting cycle.
- Identify the sections of a classified statement of financial position.
- Identify the differences between service and merchandising companies.
- Explain the recording of purchases under a perpetual inventory system.
- Explain the steps in the accounting cycle for a merchandising company.
- Prepare an income statement for a merchandiser.
- Explain the computation and importance of gross profit.
- Describe the steps in determining inventory quantities.
- Explain the accounting for inventories and apply the inventory cost flow methods.
- Indicate the effects of inventory errors on the financial statements.
- Define fraud and internal control.
- Identify the principles of internal control activities.
- Indicate the control features of a bank account.
- Prepare a bank reconciliation.
- Explain the reporting of cash.
- Identify the different types of receivables.
- Explain how companies recognize accounts receivable.
- Distinguish between the methods and bases companies use to value accounts receivable.
- Describe the entries to record the disposition of accounts receivable.
- Explain how companies recognize notes receivable.
- Explain the statement presentation and analysis of receivables.
- Describe how the cost principle applies to plant assets.
- Explain the concept of depreciation.
- Compute periodic depreciation using different methods.
- Distinguish between revenue and capital expenditures and explain entries for each.
- Explain how to account for the disposal of a plant asset.
- Explain the basic issues related to accounting for intangible assets.
- Indicate how plant assets and intangible assets are reported.
- Explain a current liability and identify the major types of current liabilities.
- Describe the accounting for notes payable.
- Explain the accounting for other current liabilities.
- Explain why bonds are issued and identify the types of bonds.
- Prepare the entries for the issuance of bonds.
- Describe the accounting for long-term notes payable.
- Identify the methods for the presentation of non-current liabilities.
- Identify the major characteristics of a corporation.
- Record the issuance of ordinary shares.
- Explain the accounting for treasury shares.
- Differentiate preference shares from ordinary shares.
- Prepare the entries for cash dividends.
- Identify the items that are reported in a retained earnings statement.
- Indicate the usefulness of the statement of cash flows.
- Distinguish among operating, investing and finance activities
Study Resources Available to Students
Students are recommended to review the material covered in their introductory/principles financial accounting course. A variety of introductory financial accounting textbooks (approximate 15 books) are on reserve at the CSUSM library for up to 72 hours checkout.