Beyond Basic Accounting Debits and Credits – CPA Exam Section Business Environment and Concepts

Good accountants should know basic accounting debits and credits. But a CPA needs to have a broader view of business and that's why the AICPA along with each state Boards of Accountancy decided to add a new segment of the CPA exam called Business Environment and Concepts. This section replaced in part the less relevant Business Law segment.

The new section tests awareness of the general business environment and business constructs that exam candidates need to understand in order to interpret the underlying business causes for and the accounting implications of business transactions. What is more, the new section tests for skills needed to apply that awareness in performing financial statement audit and attestation work and other functions usually performed by certified public accountants that bear on the public interest.

The profession accepted the need for testing in this area of ​​business knowledge because most look to certified public accountsants to interpret business concepts. As is true for the entire CPA exam, these concepts are tested in the context of entry-level accountant practice.

There are five specific areas of Business Environment and Concepts that may be tested in detail on the CPA exam.

o Business Structures

o Economic concepts essential to understanding the entity's business and industry

o Financial Management

o Information technology and how it affects the business

o Planning and measurement

Below is summary by section that a CPA candidate will be asked to know:

Business Structures

A CPA examination candidate should be able to:

Identify the general characteristics of various business forms such as Limited Liability Corps or Corporations.

Determine the recommended business form based on given facts and circumstances.

Determine income available for distribution or be able to allocate profit and losses to the owners.

Identify the advantages and disadvantages of various business forms such as S-Corps or Limited Liability Corps.

Distinguish the factors supporting a fiscal vs a calendar year end for financial reporting and federal taxation purposes and List circumstances indicating when a business should be closed.

Differentiate between the rights, duties, legal obligations, and authority of owners and that of management.

Business Economic Concepts

The CPA exam candidate should be able to:

Recognize the effect of Federal Reserve Board actions on the national economy.

Determine the purpose of transfer pricing.

Differentiate between real, nominal, and effective interest rates.

Distinguish the components of the business cycle and recognize circumstances affecting economic cycles.

Recognize circumstances giving rise to changes in exchange rates.

Understand of exchange rate fluctuations on financial position and operations.

Point out the economic circumstances giving rise to inflation, deflation, expansion and recession.

Determine the effect on an entity's net income and financial position from changes in supply and demand.

Understand economic events and the effect on the business cycle on an entity's financial position and business operations.

Financial Management

The exam will test a candidate's ability to:

Apply capital budgeting tools to make appropriate business decisions.
Demonstrate an understanding of inventory management techniques, such as just-in-time and economic order quantity. Calculate the effective interest rate.

Identify and define various business risks, such as credit risk or interest rate risk.

Utilize capital budgeting tools such as net present value, internal rate of return, payback method, discounted payback and discounted annual cash flows, including performing calculations.

Project periodic cash flows given certain facts and circumstances. Recognize the objectives and limitations of capital budgeting tools. Compute current and working capital ratios.

Differentiate between and determine when appropriate to use different forms of financing.

Analyze the trade-offs between risk and return.

Information Technology

Each applicant will be tested on their ability to:

Point out basic data validation or editing techniques and recognize basic security controls. Understand the role IT plays in financial reporting systems.

Point out the major players involved in a disaster recovery plan and determine how to set one up.

Describe & evaluate risks, limitations, and advantages of electronic commerce applications.

Apply the traditional concept of segregation of duties to IT functions.
Distinguish risks associated with the use of an electronic business information system.

Planning And Measurement

A CPA examination candidate should be able to:

Define and calculate joint and by-product costing, variable and absorption costing.

Define and determine appropriate circumstances for using performance measures.

Differentiate between cost-volume-profit analysis, target costing, and transfer pricing.

Perform cost-profit-volume analysis.

Define and differentiate among job costing, process costing, and activity-based.

List the appropriate analytical tool in given circumstances.

Calculate the effect of depreciation in operating and capital budgeting.

Identify and calculate the components of a master budget.

Define calculate, and explain budget variances.

Business Environment and Concepts section of the CPA exam is intend to insure that even new CPAs will understand and think about more than just basic accounting debts and credits.


Top Reasons How a CPA Can Help Tax Preparation

There are so many people in New York who try to do their own taxes and as long as you don't itemize then it is somewhat easy to do. If however you do get the opportunity to itemize or if you have several complications that may make it hard to do your taxes on your own then you need to get a CPA in New York to do it. There are several reasons why you would want to hire a CPA to prepare your taxes NYC.

If you run your own business you may need to hire a CPA to do your tax preparation Manhattan for several reasons. There are so many things that a person can miss if they do not hire a CPA to do their taxes. There may be money lost when you don't know where to look. If you own your business you are probably renting, leasing or owning your building or property unless you work at home. You may have employees and pay into workers compensation. You may also pay your taxes quarterly instead of once a year. All of these play a factor in how many deductions you have. If you buy goods or ship them you probably have a lot of shipping expenses and buying costs. Even if it is a percentage, an expense is still an expense. A business looking for Manhattan tax preparation will want the assistance of an experienced CPA.

If you do run your own business in New York and you must pay taxes quarterly you may bring them to your CPA to handle that for you. A Manhattan CPA can handle all your books and record keeping on a weekly, bi-weekly, monthly, or quarterly basis. The more you take them to the NY CPA the more they can help you keep track of all your business records and at tax time you will be completely caught up and may be able to get money back this year.

If you need help keeping track of your tax information throughout the year your CPA will be able to give you a few tips to help you keep better track of your expenses.

If during the year things change and you start your own business then you can contact your CPA to find out how you can keep record of the change and find out how it can impact your taxes NYC during tax season. More and more people are considering starting their own business and for that reason it is important to keep track of everything from day one and to contact your CPA in New York or Manhattan to find out what you need to do to keep better records of it.

If you have a large business you may want to take your records and receipts to a New York CPA one time a month. Find a safe place to keep track of your receipts that pertain to your business. If you do a lot of business online you may need to print off receipts so you can add them to your records for better tax preparation Manhattan.


Tax Preparation Requires Cooperation Between CPA And Client

A CPA or certified public accountant is a huge help to individuals and businesses when it comes time for filing taxes. However, in order for the CPA and client relationship to be successful, communication is imperative. By understanding how communication works best between a CPA and his or her client, you can make sure your relationship with your CPA is solid. In addition, this helps to ensure that filing taxes, keeping records, and all other processes are easier and more accurate.

Don't Be Afraid to Ask Questions

One of the best methods of communication is asking questions. As a client, if you are unsure of a specific process or you do not know why certain results are the way they are you can ask your CPA to explain it to you. Things like tax preparation, expense records, and loss charts can be very confusing for someone who doesn't work with those numbers every day. A great accountant will take the time to explain what he or she is doing and why things have to be completed a certain way. Just because you're not doing the tax preparation or other processes yourself, doesn't mean you shouldn't be able to understand what's happening.

Reports and Information

If there's something a CPA knows about, it's keeping records. A great certified public accountant will record everything and provide reports and information to you regarding the processes he or she is going through in order to file your taxes or keep up with your business records. This will allow you to examine the processes yourself, and keep your own records for those processes. It's also very important for you to keep records and provide your CPA with information as well. Keeping receipts and transaction logs of expenses will allow your CPA to prepare your taxes in the most accurate way. This ensures that your taxes are paid correctly and that you're on an even ground with the IRS.

Why a CPA is the Best Choice

In addition to learning how to prepare taxes to begin with, a CPA will spend hours each year learning new information about laws that have changed, new stipulations for tax preparation and so much more. Most individuals don't have the time to spend themselves learning these things, and trusting a professional is the best choice. A qualified CPA understands tax laws easily and in-depth, so they can make sure your taxes are filed correctly and accurately. In the same way that you'd hire an expert cake decorator to make sure your wedding cake is perfect, hiring a CPA ensures that your taxes are filed perfectly.

Overall, by having a great relationship with your CPA, you can be sure that your tax preparation is done accurately and that nothing has been missed. It's important to trust your accountant and communication is the best way to build that trust.


What Is CPA Advertising?

CPA is an abbreviation of Cost Per Action. As the name suggests that this is an advertising technique in which the advertiser pays for his ad only when the viewer of the ad takes any action on that ad. Now it is up to the advertiser that which action he wants his viewer to perform on the ad. For example advertiser wants to sell his product so if the viewer of the ad buys the product while viewing his ad then an action will be performed on the ad and advertiser will be charged according to the agreement. Pay per Action i-e PPA is also another name of this technique. Some people confuse Cost Per Action with Cost Per Acquisition which is totally wrong because not every action is acquired.

Actions of CPA:

CPA consists of several types. Some of them are discussed below:

A type of CPA is filling a form. You may be required to fill out a form in order to complete the action on that ad.

The action required to be performed can be of subscribing to the newsletter of the advertising company.

To get information about the viewer of the ad can also be a type of CPA. The information can be his name, Email, and other such information.

Email Signup is a very famous action that could be performed.

Sometimes full contact information like name, address, city, state, country and several other are also required to complete an action successfully.

Travel booking is also an important action that could be performed.

E-Commerce is also very much in now a days.

There are many more actions which can be performed in CPA. These actions are different for every advertiser and depends upon the goals and objectives of the advertiser.

Moreover, there are some advertisers which are selling products online to their viewers. They set the cost of CPA according to the products that are sold. For example there is an advertiser which is selling refrigerators and other electrical items. If a viewer buys refrigerator online then advertiser will pay more amount. If a viewer buys a small electrical item like iron or kettle than he will be charged less.

Measuring the Cost Per Action:

There are several calculators available online to calculate your Cost Per Action. To do it manually, first of all you have to calculate number of actions. Number of actions can be found out by getting a product of the conversion rate of your ad to click through rate percentage. Once you get your number of actions, now divide the total cost with a number of actions and you will get Cost Per Action.

Cost Per Action advertising is usually used by associates because associates work with some company. Associates likes CPA advertising because in CPA for every action performed by the viewer company will give a handsome amount to the associates. The action that is to be performed is decided between the company and associate. In this way company can get many leads which will provide them with promising customers in future.


The CPA Ethics Course and Ethics Requirements

If you haven't paid attention to the industry lately, CPA Ethics is a hot topic given the number and nature of corporate scandals and failures we've seen in recent years. But even prior to some of the most noted scandals, CPAs have always been required to pass the ethics exam, and take ethics related courses as part of their ongoing continuing professional education (CPE).

Each State has its own requirement dictating the amount and nature of ethics related CPE a CPA must take each year. Ethics is one of the CPA exam requirements and such a hot topic that full blown regulations have been formed to govern corporate behavior. The two most notable compliance regulations of recent are the Sarbanes Oxley (SOX) and the Dodd-Frank Acts.

Though the CPA ethics exam does not guarantee inappropriate behavior, it is meant to provide the foundation that would likely curb inappropriate behavior. The CPA ethics exam is part of the CPA license requirements, required by most States after a CPA candidate has passed the CPA exam. Although many choose to take the ethics exam prior to the CPA exam (most States allow you to do that), I recommend waiting until after so that you can focus all your energy on passing the CPA exam, which is the tougher one.

Who Governs and Administers the Ethics Exam?

The CPA ethics exam is usually administered by the American Institute of Certified Public Accountants (AICPA), except in a handful of States where another party administers the exam. There are some States that do not require a candidate to take the CPA ethics exam. However, candidates are required to take a short ethics course within a certain time frame after passing the CPA exam. (Note: The ethics course is not like one of the many and heavily advertised CPA courses online that are geared toward the Prometric CPA exam)

According to my son who recently took it, the CPA ethics exam is not too difficult given some practice of multiple choice questions. The AICPA's ethics course is a self study course that you can take online at your convenience. It mostly goes through the AICPA Code of Conduct, which you can read about on the AICPA's website. The material focuses heavily on the concept of "Independece", or the objectivity necessary to be a "good" CPA.

You take the ethics exam electronically and get your scores instantly upon submission. Each exam packet comes with its own unique serial number that you have to input online. When you first go online to take the exam, you may see a large overwhelming answer sheet. Don't worry, you won't have to complete all of it. The exam itself is only 40 questions.

If you are a better test taker using pen and paper, you will have the option to do so and mail in your answer sheet directly to the State Board of Accountancy. However, the snail mail method can take weeks before you find out your score. If you decide to go this route, remember to make a copy of your test sheet before sending it in. I am personally very paranoid about the mail system.

AICPA Ethics Exam Tips and Must Know Information

Keep in mind that you have a full two years to study and take the exam from the time of your purchase. In the unfortunate event that you miss the deadline, you can ask for a 30 day extension by contacting AICPA directly. You can reach them at 888-777-7077.

The exam is fairly straight forward, but in the event you need assistance, there is a really cool free resource called the "Ask the Ethics Expert". This is a website where you can ask up to three questions about the AICPA CPA Ethics exam and get answers for free.

How Much Does the CPA Ethics Exam Cost?

Not nearly as much as the CPA exam! You can purchase the CPA Ethics exam online from the AICPA website for under $ 150.

If you are an AICPA member, you pay a discounted price closer to $ 100. If you wish to shop around for more cost effective options, you can contact your State board and ask them for recommendations. They will usually have a list to share with you. I cannot guarantee that other programs will be more cost effective.

If you end up getting it from the AICPA, the course you want to get is the one titled: "Professional Ethics: AICPA's Comprehensive Course".

Here is what you get with the AICPA's version of the CPA ethics exam:

  • 11 Hours of CD Courses
  • 2 Year Time Frame to take the exam from the time you purchase the course
  • 40 multiple choice question test (you need a 90% to pass)
  • Electronic submission capability
  • Studying for the CPA Ethics Exam

I and my son both admit that studying this material for 11 hours can be quite brutal. The good news is that you don't have to. There is some material you can do away without, but you have to use your best judgment to ensure you are not doing without the critical information you need to know to pass the exam.

As I was looking at some of the more recent questions on the exam, the single best tip I can give you is not to settle on the first best answer that sounds correct. The exam is multiple-choice and is geared to trick you. Be careful and read every option in detail before arriving at your final answer.

In the unfortunate event that you fail the exam, you can retake it up to 2 more times for a total of 3 times if you prefer the online method. However, you can retake it again after your third attempt but this time you will have to mail in your answer sheet.

So there you have it. A complete synopsis of the CPA Ethics exam. See, back in the day, I had some heavy books to study to prepare for the exam. Now days, you have some pretty slick, interactive online resources that are easier to digest and work with. I recommend you check it out.

My suggestion to you is to take the ethics exam as soon as you finish the CPA exam and get it out of the way. I wish you all the best in passing the CPA ethics exam. Go get that big CPA salary. Please let me know if I can be of any help to you.