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ACC 101 · Unit 1 of 6

Accounting Foundations

Financial Accounting

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Learning objectives

After completing this unit, you will be able to:

  • Explain why accounting exists and who relies on financial reports
  • Use the accounting equation (A = L + E) to trace how transactions change financial position
  • Classify assets, liabilities, and equity on a balance sheet
  • Distinguish economic events from accounting events under GAAP
  • Read the three primary statements as one integrated system

Why this matters

Every manager eventually defends a number: cash runway, margin trend, covenant compliance, or valuation. Unit 1 builds the vocabulary and logic behind those numbers before you touch debits and credits in Unit 2. Skip this unit and later mechanics feel like arbitrary rules instead of a coherent model of the business.

Unit overview

Work through the five lessons below in order. Each is a full textbook-style section with worked examples and practice problems.

#LessonCore idea
1Why Accounting ExistsCredibility with investors, lenders, and operators
2The Accounting EquationAssets, liabilities, equity, and articulation
3Assets, Liabilities, and EquityClassification and balance sheet reading
4Economic Events versus Accounting EventsWhen the ledger records (and when it waits)
5The Financial Statements as an Integrated SystemIncome statement, balance sheet, cash flow links

Connection to applied work

Capture one public company (or your own firm) and note how each lesson's ideas appear in its 10-K (annual SEC filing). That thread becomes raw material for your Financial Accounting applied project.

Practice

  1. Pick a company headline where the stock moved but earnings did not change immediately. Which lesson explains the gap?
  2. Draw a balance sheet with three assets, two liabilities, and equity that balances. Change one line and show what else must move.
  3. Explain in one paragraph why cash and net income diverge without calling it "accounting magic."

Knowledge check

  1. What problem does accrual accounting solve that a checkbook cannot?
  2. Name two stakeholders who read financial statements for different reasons.
  3. What does it mean for statements to "articulate"?
  4. How will Unit 2 build on this unit?

Key takeaways

  • Accounting is a credibility system, not just compliance.
  • A = L + E is the spine; every later topic refers back to it.
  • Statements tell one story through different lenses (performance, position, cash).
  • Economic reality and GAAP records diverge by design; know both clocks.
  • Start the lessons above; the unit assessments on this page come after all five.

Unit assessment

Complete each section below. Score 80%+ on the quiz to finish this unit's assessment.

40% applied project35% knowledge checks25% reflections

Exercises

Apply what you learned in this unit with structured practice.

ExerciseApplied practice: Accounting Foundations45 min
Complete a focused practice exercise on **Accounting Foundations**. 1. Choose a real company, product, or situation you know. 2. Apply one core framework from this unit to analyze it. 3. Write your analysis in 300–500 words with a clear recommendation. 4. Cite at least one credible source.

Deliverable

300–500 word analysis document saved to your portfolio under ACC 101.

Rubric

  • • Framework applied correctly (not just named)
  • • Specific evidence from a real example
  • • Clear recommendation with tradeoffs acknowledged
  • • Professional writing with source citation
ExerciseDrill: Accounting Foundations30 min
Work through the practice problems in the unit lesson without looking at notes. Then check your work against the lesson and write a short reflection: - What you got right - One mistake you caught - One concept to review before the next unit

Deliverable

Problem solutions + 150-word reflection in your ACC 101 workbook.

Rubric

  • • Attempted all practice items before checking answers
  • • Honest reflection on errors
  • • Identifies a specific review action

Model / spreadsheet

Build or extend a spreadsheet model tied to this unit.

ModelSpreadsheet model: Accounting Foundations60 min
Build a spreadsheet model demonstrating **Accounting Foundations**. **Requirements:** - Separate Input, Calculation, and Output sections - Label all units ($, %, units) - Include at least one sensitivity or scenario comparison - Add a balance check or reasonableness test Use Google Sheets or Excel. Link the model to your Financial Accounting applied project project where applicable.

Deliverable

Spreadsheet file with Inputs / Model / Outputs tabs · One-paragraph summary of key insight from the model · Screenshot or export saved to portfolio

Rubric

  • • Assumptions stated explicitly
  • • Logic is auditable (formulas or steps visible)
  • • Output answers a specific business question
  • • Sensitivity or scenario considered

Knowledge quiz

Check your understanding before marking the unit complete.

1. Lakeview Coffee has $500,000 in assets and $300,000 in liabilities. What is equity?

2. A company borrows $50,000 from a bank. What is the immediate effect on the accounting equation?

3. When a customer pays an invoice for goods sold last month, which statement is correct?

4. Which item appears on the income statement but NOT as an operating expense?

5. A SaaS company collects $120,000 on January 1 for a twelve-month license. On January 1, what is the accrual accounting effect?

6. Which financial statement is a stock measure (point in time) rather than a flow measure?

7. Ending retained earnings equals beginning retained earnings plus net income minus what?

8. Why does GAAP require standardized accounting rules for public companies?

Next unit: Recording Transactions →