Welcome to part two of our three-part series on how to get the most from your multiple choice question (MCQ) study time. If you missed part one, head here to catch up. If you’ve already read part one but need a little refresher, keep reading.
There are four ways that you can get benefit from studying MCQs, beyond the basic “did I get the answer correct” test-bank quiz. We are delving in-depth to one particular method: taking what may be a level one or level two question and asking (as well as understanding) how those questions could have been level three or four questions. The first step is to understand where in the general accounting cycle your question falls.
Financial accounting (and therefore the FAR exam) is rooted in preparing financial statements and footnotes in compliance with US GAAP. If at any point you’re stuck, go back to the general accounting cycle. Ask yourself what are you working on, where does it fit into the cycle, what do you do next. Anchoring in the accounting cycle gives you a firm foundation to explore:
- Journal entries
- Impact on the income statement
- Impact on the balance sheet
- Impact on the statement of cash flows
- Specific footnote disclosures
To summarize, once you’ve determined where in the accounting cycle your question lays, start considering the above bullets and what repercussions your question will have on each of those bullet points. By thinking about all aspects of a topic, not just what the answer to the question is, you’ll be better prepared to answer any MCQ or simulation you may get.
We don’t recommend this in-depth drill-down to be performed on every topic - instead we recommend the technique on the most important topics (and those topics you struggle with). Use the AICPA blueprints (Jan 2019 or July 2019 depending on when you are testing) to help determine which ones are most important (hint: look for representative tasks that are at the analysis level).
Some of the FAR topics we recommend you have a firm foundation in to pass the exam (in no particular order):
- Accounts Receivable
- Contingent Liabilities
- Notes Receivable and Notes Payable
- Deferred Income Tax Assets and Deferred Income Tax Liabilities
- Fixed Assets (PP&E)
- Common Stock
- Treasury Stock
- Preferred Stock
In addition to the above listed topics, the in-depth deep-dive is a great technique to use for any topic that you are struggling with. It’s difficult to struggle with a topic if you can run through the journal entries, impact on carous financial statements, footnote disclosures, and exceptions for that topic.
To wrap up our discussion, head over to part three, where we work through a deep-dive example using bonds payable.
Part One: click here to read
Part Three: click here to read