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 Financial Accounting  posted by  duggu   on 12/30/2007  Add Courseware to favorites Add To Favorites  
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Kothari, S. P., 15.511 Financial Accounting, Summer 2004. (Massachusetts Institute of Technology: MIT OpenCourseWare), (Accessed 11 Jul, 2010). License: Creative Commons BY-NC-SA

Diagram showing how information flows from a company to outsiders.

This diagram explains the necessity of financial accounting: it promotes the exchange of resources. (Diagram by Prof. S. P. Kothari. Background photograph courtesy of OCW.)

Course Highlights

The lecture note slides explain the basics of financial accounting. Students practice these skills on the required and optional textbook problems listed on the readings page.

Course Description

This six-week summer course teaches basic concepts of corporate financial accounting and reporting. This information is widely used in making investment decisions, corporate and managerial performance assessment, and valuation of firms. Students perform economics-based analysis of accounting information from the viewpoint of the users of accounting information (especially senior managers) rather than the preparer (the accountant). This course is restricted to MIT Sloan Fellows in Innovation and Global Leadership.

*Some translations represent previous versions of courses.


Course Materials

Text: Stickney, Clyde P., and Roman L. Weil. Financial Accounting: An Introduction to Concepts, Methods, and Uses. 10th ed. Thomson South-Western, 2003. ISBN: 0324183518.

Course Objective

The objective of the course is to introduce the language of business and to train you in the analysis of financial statements. Accounting attempts to measure and report corporate performance. Users demand the performance measure in a variety of decisions they make. For example,

  1. Managers use accounting information in making investment decisions;
  2. Investors use accounting information in valuing stocks;
  3. Bankers rely on accounting information in deciding whether to lend money to a business and in assessing the risk of the loan; and
  4. Accounting information is crucial in evaluating the performance of employees at various levels in an organization.

In making all of these decisions, an interdisciplinary understanding of the entire business is necessary. Toward this end, the course also introduces concepts from finance and economics (e.g., cash flow discounting, risk, valuation, and criteria for choosing among alternative investments) throughout the course, which will enable students to place accounting in the context of a business.

Teaching Instructor Sessions

The Teaching Instructors are important members of the teaching team and are committed to helping the class reach the course objectives. They hold the accounting recitation sessions and are available during office hours for one-on-one help. They grade the written assignments and exams.


A student's grade will be based on the following weights:

Written Problem Sets in Study Groups 25%
Mid-term Exam 30%
Final Exam 45%


See the last column of the calendar for important details of each day's plan. Problem sets must be submitted before the start of the class of the due date. Problem set can be done individually or in study groups. The "Do" problems will help you prepare for class. They do not have to be submitted.


The calendar below provides information on the course's lecture (L), recitations (R) and exam (E) sessions.

L1 Overview and Introduction to Financial Statements

Administrative Matters, Discussion of Accounting Framework
L2 The Balance Sheet    
R1   Highlights of Introductory Topics: Financial Accounting, Balance Sheet, Income Statement, etc.

Review of Technical Items
L3 The Income Statement and Principles of Accrual Accounting    
L4 The Accrual Accounting Process of Preparing Financial Statements   Problem set #1 due
L5/R2 The Accrual Accounting Process of Preparing Financial Statements (cont.) Journal Entry and T-account

Cash vs. Accrual Accounting

Accounting Entry for Sales, Adjusting Entries, and Closing Entries
L6 The Accounting Process   Problem set #2 due
L7 Statement of Cash Flows    
L8/R3 Statement of Cash Flows (cont.)

Financial Statement Analysis
Statement of Cash Flows

Indirect Approach
L9 Receivables and Revenue Recognition    
L10/R4 Receivables and Revenue Recognition (cont.) Midterm Review Problem set #3 due
L11 Inventories    
L12 Long-lived Assets    
R5   Accounting for Inventory LIFO and FIFO  
E1 Mid-term Exam    
L13/R6 Matching Principle for PP&E Accounting for Long Lived Assets Time Value of Money  
L14 Current Liabilities and Contingencies    
L15 Time Value of Money

Long-term Debt
L16 Long-term Debt and Leases   Problem set #4 due
L17/R7 Deferred Taxes

Marketable Securities
Marketable Securities



Deferred Tax
L18 Investments, and Business Combinations   Problem set #5 due (two days after L18)
L19 Business Combinations and Course Review    
E2 Final Exam   Tell A Friend