CPA FAR - Financial Accounting and Reporting Cheat Sheet

Financial Accounting and Reporting (FAR) is one of the three Core sections every candidate must pass to earn the US Certified Public Accountant (CPA) license, and it tests how a newly licensed CPA prepares, reviews, and analyzes financial statements, account balances, and transactions under U.S. GAAP. The 2026 blueprint splits FAR into three weighted areas: Financial Reporting (30 to 40%), Select Balance Sheet Accounts (30 to 40%), and Select Transactions (25 to 35%), drawing on the FASB Accounting Standards Codification, FASB Concepts Statements, U.S. SEC rules (Regulation S-X and S-K), AICPA AU-C Section 800 for special purpose frameworks, and GASB standards for state and local governments. Roughly 80 to 100% of the section sits at the Application and Analysis skill levels, so FAR rewards candidates who can actually compute balances, post journal entries, and reconcile accounts rather than just recall a definition. The single most important habit it tests is identifying the reporting entity first: assume a for-profit business entity under U.S. GAAP unless the fact pattern names a "not-for-profit," "nongovernmental, not-for-profit," or a "local government," "state," "municipality" or "city" entity, because the measurement and presentation rules diverge sharply across those frameworks.

What This Cheat Sheet Covers

This topic spans 37 focused tables and 306 indexed concepts. Below is a complete table-by-table outline of this topic, spanning foundational concepts through advanced details.

Table 1: Classified Balance Sheet Preparation and Error CorrectionTable 2: Income Statement and Foreign Currency TransactionsTable 3: Comprehensive Income and Statement of Changes in EquityTable 4: Statement of Cash Flows (Indirect Method)Table 5: Consolidated Financial Statements and Noncontrolling InterestsTable 6: Notes to the Financial StatementsTable 7: Not-for-Profit Statement of Financial Position and Net AssetsTable 8: Not-for-Profit Statement of Activities and Functional ExpensesTable 9: Not-for-Profit Statement of Cash Flows and NotesTable 10: Governmental Measurement Focus and Basis of AccountingTable 11: Governmental Fund Types and Purpose of FundsTable 12: SEC Reporting: Forms 10-K, 10-Q and 8-KTable 13: Earnings Per Share (Basic and Diluted)Table 14: Special Purpose Frameworks (Cash, Modified Cash, Tax Basis)Table 15: Financial Ratios: Profitability and LiquidityTable 16: Financial Ratios: Solvency, Performance Metrics and VariancesTable 17: Cash and Cash Equivalents and Bank ReconciliationTable 18: Trade Receivables, Allowances and TransfersTable 19: Inventory: Costing Methods and ValuationTable 20: Property, Plant and Equipment: Recognition, Depreciation and DisposalTable 21: Long-Lived Asset Impairment and Held-for-SaleTable 22: Investments at Fair ValueTable 23: Investments at Amortized Cost and Credit LossesTable 24: Equity Method InvestmentsTable 25: Intangible Assets and Capitalized SoftwareTable 26: Payables, Accrued Liabilities and Asset Retirement ObligationsTable 27: Notes and Bonds Payable: Interest and Carrying AmountTable 28: Debt Modifications, Extinguishments and Covenant ComplianceTable 29: Equity Transactions (Issuance, Dividends, Splits, Treasury Stock)Table 30: Accounting Changes and Error CorrectionsTable 31: Contingencies and CommitmentsTable 32: Revenue Recognition: The Five-Step ModelTable 33: Not-for-Profit Contributions and Revenue RecognitionTable 34: Accounting for Income TaxesTable 35: Fair Value MeasurementTable 36: Lessee AccountingTable 37: Subsequent Events

Table 1: Classified Balance Sheet Preparation and Error Correction

CPA FAR Area I-A.1, General-Purpose Financial Reporting (For-Profit): preparing a classified balance sheet (statement of financial position) from a trial balance, correcting identified errors, and agreeing amounts to supporting documentation under U.S. GAAP per the FASB ASC.

Concept	Example	Description
Current vs Noncurrent Classification	Cash, receivables, inventory due in cycle `→` current; building, 5-year note `→` noncurrent	Current = realized or settled within one year or the operating cycle, whichever is longer. Everything else is noncurrent. The split drives working capital and the current ratio.
Operating Cycle	Buy inventory `→` sell on account `→` collect cash; if that takes 15 months, use 15 months	The time to convert cash back into cash. When it exceeds 12 months, it (not one year) sets the current boundary. Usually under a year, so one year normally governs.
Asset Ordering by Liquidity	Cash, then short-term investments, receivables, inventory, prepaid expenses	Within current assets, the most liquid items are listed first. Noncurrent then follows: long-term investments, PP&E, intangibles, other assets.
Current Portion of Long-Term Debt (CPLTD)	$1,000,000 note, $100,000 principal due next year `→` $100,000 current, $900,000 noncurrent	The principal of long-term debt due within the next year (or cycle) is reclassified to current liabilities, even though the overall note is long-term.

Table 1: Classified Balance Sheet Preparation and Error Correction

Concept	Example	Description
Current vs Noncurrent Classification	Cash, receivables, inventory due in cycle `→` current; building, 5-year note `→` noncurrent	Current = realized or settled within one year or the operating cycle, whichever is longer. Everything else is noncurrent. The split drives working capital and the current ratio.
Operating Cycle	Buy inventory `→` sell on account `→` collect cash; if that takes 15 months, use 15 months	The time to convert cash back into cash. When it exceeds 12 months, it (not one year) sets the current boundary. Usually under a year, so one year normally governs.
Asset Ordering by Liquidity	Cash, then short-term investments, receivables, inventory, prepaid expenses	Within current assets, the most liquid items are listed first. Noncurrent then follows: long-term investments, PP&E, intangibles, other assets.
Current Portion of Long-Term Debt (CPLTD)	$1,000,000 note, $100,000 principal due next year `→` $100,000 current, $900,000 noncurrent	The principal of long-term debt due within the next year (or cycle) is reclassified to current liabilities, even though the overall note is long-term.