Accounting in real life: why the FAR exam felt easier for me

The numbers don’t lie. The stats show that FAR is perceived to be the hardest section of the CPA exam. It consistently has the highest number of candidates and the highest failure rate. As far as course materials go, it’s also the section with the most content.

It makes sense for FAR to feel that way because it's foundational accounting. The principles you learn in FAR carry over to other sections of the CPA exam.

When there's an audit, the audit is based on the transactions that have been recorded and the accounting methods and principles used to record them.

In REG, when you prepare business (and some HNW personal) tax returns, it's based on financial statements.

Accounting in real life: payroll journal entries | © Nikki Winston CPA

Why is the FAR exam so hard?!

FAR is closest to what happened in a business. It's where you record transactions from those detailed receipts (LOL). There are things that happen in FAR, that are presented to you as a clean concept in a book, but it's a messy reality in accounting departments. One example that comes to mind is bank reconciliations.

Let's say there's a check that was written at the end of the month that wasn't cashed until the following month; or the monthly bank fee wasn't recorded. These are the perfect scenarios. Real bank recs can be messy - meaning there's a hodgepodge of debits and credits without notes so you're not sure what to do with it. Is that a customer payment or a refund check? Is this deposit posted to the right bank account? Did anybody actually research those rec items that have been sitting for 7 months?

Remember that a debit to a bank account at the bank is a decrease but a debit to a bank account in accounting is an increase and vice versa.

Textbook and real-life accounting are not the same.

Accounting in real life means things aren't always intuitive or laid out for you, especially if the account recs aren't up to par. No matter how hard you study, things will happen in your accounting career that aren't in your prep course or on the CPA exam. I don't recall studying anything about securitization but it's a niche experience that I had in real life. On the flipside, all of the cost accounting stuff that I thought I'd never see again became my springboard into M&A consulting.

With securitization, I had access to subject matter experts, one in particular who was a CPA and had answers to all of the questions on my curious mind like:

• What's an issuance?

• Why are we doing a deal in April vs. waiting until October?

• Are these deal costs being expensed or capitalized?

• What do we need to know about the debt covenants?

• Why are only doing $300 million when the last issuance was $750 million?

Anything I asked about securitization; I got the who/what/where/when/why/how with examples.

FAR felt easier for me for 2 reasons...

Because I had 2 things: exposure and access.

Exposure to accounting in real life with journal entries, financial statements, and those monthly meetings. Understanding how the accounts interrelate and play off of each other + doing the diligence to validate what I see in the financials. I learned how to look at numbers through an accountant's lens, knowing what to look for.

Having access to CPAs while I was "thinking" about the CPA exam was equally important. Back to securitization: I understand Capital Markets now. I'm grateful for the CPAs who were willing to invest that type of time, energy, and effort into my development while giving me insights into what being a CPA looks like. Anytime you can find people who know what they're doing AND they're willing to teach you what they know, seize those moments.

How we can help CPA candidates

Future CPAs need accounting EXPERIENCES. They don't need plug-and-play study materials with no guidance on how to use them. The don't need 7,500 more practice questions. They don't need more textbooks and course credits.

They need exposure and they need access.

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