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ACC 101 · Unit 4 of 6

Major Accounts and Estimates

Financial Accounting

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Learning objectives

After completing this unit, you will be able to:

  • Design and evaluate cash internal controls and bank reconciliation
  • Estimate credit losses and interpret AR (accounts receivable) aging
  • Account for inventory, COGS, and write-downs
  • Capitalize and depreciate PP&E (property, plant, and equipment)
  • Classify liabilities, leases, and long-term obligations under ASC 842 basics

Why this matters

Most fraud and restatement risk lives in "boring" accounts: cash, receivables, inventory, fixed assets, and debt. Unit 4 teaches the judgment and controls inside each major line item on the balance sheet.

Unit overview

#LessonCore idea
1Cash and Internal ControlsSegregation of duties, reconciliation, fraud patterns
2Accounts Receivable and Credit LossesAllowance method, DSO, write-offs
3Inventory and Cost of Goods SoldFIFO/LIFO/weighted average, LCNRV, shrinkage
4Property, Plant, Equipment, and DepreciationCapitalize versus expense, depreciation, disposals
5Liabilities, Leases, and Long-Term ObligationsDebt, contingencies, ROU assets and lease liabilities

Connection to applied work

Draft a one-page internal control memo for a company you know (or a case company) covering cash, credit policy, and inventory counts. This feeds your Financial Accounting executive memo deliverable.

Practice

  1. Reconcile GL cash to a bank statement with one outstanding check and one deposit in transit.
  2. Compute ending allowance for doubtful accounts from an aging schedule.
  3. Explain why a capitalized lease appears on both sides of the balance sheet.

Knowledge check

  1. What control weakness does lapping exploit?
  2. When does inventory write-down hit the income statement?
  3. What is accumulated depreciation's role on the balance sheet?
  4. How does an operating lease differ from a finance lease on the balance sheet?

Key takeaways

  • Major accounts combine mechanics with estimates and controls.
  • Contra accounts (allowance, accumulated depreciation) matter for net presentation.
  • Leases and contingencies require footnote reading, not just face statements.
  • Unit 5 assembles these accounts into published financial statements.

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: Major Accounts and Estimates45 min
Complete a focused practice exercise on **Major Accounts and Estimates**. 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: Major Accounts and Estimates30 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: Major Accounts and Estimates60 min
Build a spreadsheet model demonstrating **Major Accounts and Estimates**. **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 executive memo 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. The allowance method for bad debts records expense:

2. Gross accounts receivable is $1,480,000 and the allowance is $74,000. Net accounts receivable is:

3. Using the periodic inventory system, COGS equals:

4. In a period of rising purchase costs, which cost flow assumption yields the highest COGS and lowest ending inventory?

5. Equipment costing $60,000 with $0 salvage and a 5-year life has annual straight-line depreciation of:

6. Which internal control principle reduces the risk that one employee can both record and conceal theft?

7. Under ASC 842, an operating lease typically creates on the balance sheet:

8. When a specific uncollectible account is written off under the allowance method, the income statement effect is:

Next unit: Financial Reporting →