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name: cpa-accounting
description: Use this skill to work financial accounting and reporting the way a CPA works — analyzing transactions into correct journal entries, preparing financial statements and running the close, and selecting the right US GAAP or IFRS treatment with proper disclosure and internal-control awareness. It structures the accounting; it is never an audit, a tax filing, or a CPA sign-off, and every material or complex treatment routes to a licensed CPA.
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# CPA Accounting

> **What this is** — a repeatable method for doing financial accounting and reporting at working-CPA depth: analyzing transactions into correct debits and credits (accruals, revenue recognition, leases, and the rest), preparing the income statement, balance sheet, and cash-flow statement and running the period-end close, and selecting and applying US GAAP or IFRS treatment with the right note disclosures and internal-control awareness. It structures the work so a licensed professional can review from a rigorous starting point.
> **What this is NOT** — **not an audit or attestation, not tax advice, not a CPA sign-off, and not an opinion on fair presentation.** All output is **unaudited**. Complex or material treatments, and any judgment about what a standard requires, route to a licensed CPA; audit/attest engagements and tax filings route to the appropriate licensed professional. It prepares and structures the accounting; it does not opine, certify, or file.

## When to use this
- A set of transactions needs analyzing into correct journal entries with the right recognition and measurement.
- Financial statements must be prepared and a period-end close run, with reconciliations and adjusting entries.
- A treatment must be selected under US GAAP or IFRS and matched to the standard that governs it.
- Note disclosures need drafting to accompany the statements, before professional review.
- Someone needs the accounting structured cleanly for a licensed CPA to review, audit, or sign — not signed here.

## Operating principle
Prepare to the standard, sign off never. The method works each transaction and statement the way the accounting model demands — debits equal credits, substance over form, the right standard applied — sourcing every treatment to the governing guidance and labelling every judgment. It runs in one direction: **analyze the transaction → post and adjust → prepare and reconcile the statements → select treatment and disclose → route material judgments to the CPA**, with a check at each handoff so nothing is asserted the evidence and the standard don't support. It concludes no opinion: fair presentation, audit, and tax positions belong to the licensed professional.

## Capability 1 — Transaction analysis & journal entries
**Goal.** Analyze each transaction into correct, balanced journal entries with the right recognition, measurement, and timing.
**Inputs.** Source documents and transaction facts, the applicable reporting basis (US GAAP or IFRS), the entity's accounting policies.
**Method.**
1. Identify the **accounts and their nature** (asset, liability, equity, revenue, expense) and apply **debits and credits** so the entry balances.
2. Apply the correct **recognition and measurement**: accruals and deferrals, **revenue recognition** under the five-step model (**ASC 606** / IFRS 15), **leases** (**ASC 842** / IFRS 16), and the relevant treatment for the transaction type.
3. Resolve **timing and cut-off** — the period the transaction belongs to — and record accruals or prepayments accordingly.
4. Note where a treatment involves **judgment or estimation** (allowances, impairment, useful lives) and label it as such.
5. Flag any **complex or material** treatment as a **candidate — pending CPA review**, rather than concluding it.
**Output.** Balanced journal entries with recognition/measurement rationale, timing resolved, and judgment items flagged for review.
**Quality bar.** Debits equal credits on every entry; the governing standard is cited for revenue, leases, and other significant treatments; estimates and material judgments are labelled and routed, not silently concluded.

## Capability 2 — Financial statement preparation & the close
**Goal.** Prepare the core financial statements and run a period-end close that ties out and reconciles.
**Inputs.** The trial balance and ledgers, the journal entries (Cap 1), prior-period statements, supporting schedules.
**Method.**
1. Post entries and produce an **adjusted trial balance**, booking **adjusting entries** (accruals, deferrals, depreciation, allowances) at period end.
2. Prepare the **income statement**, **balance sheet**, and **statement of cash flows** (direct or indirect), ensuring they **articulate** — the statements tie to one another.
3. Run **reconciliations** (bank, subledger-to-GL, intercompany) and resolve reconciling items to closure.
4. Assemble the **close checklist** — what's done, what's open, who owns each item — so the close is auditable.
5. **Tie every figure to a source** and mark the whole set **unaudited draft** for professional review.
**Output.** A set of articulating financial statements, the adjusting entries and adjusted trial balance, completed reconciliations, and a close checklist — all labelled unaudited draft.
**Quality bar.** The statements articulate and tie to the trial balance; reconciliations are cleared or their items owned; every figure is sourced; nothing is represented as audited or final.

## Capability 3 — Standards, disclosure & controls
**Goal.** Select the correct accounting treatment under the applicable framework, draft the required disclosures, and note internal-control considerations.
**Inputs.** The transaction or balance in question, the reporting framework (US GAAP or IFRS), the disclosure requirements, the control environment.
**Method.**
1. **Select the treatment** by matching the fact pattern to the governing standard (**FASB ASC** topic or **IFRS/IAS** standard), and note where US GAAP and IFRS would differ.
2. Draft the **note disclosures** the standard requires (accounting policies, significant estimates, commitments, related parties, subsequent events) and match each note to its requirement.
3. Where **non-GAAP or non-IFRS measures** appear, keep them reconciled to the nearest statutory measure and note the presentation discipline (**SEC Regulation G** context).
4. Note **internal-control** considerations (**COSO** framework — segregation of duties, authorization, review) as awareness for management, not a controls audit.
5. Mark every treatment selection as **candidate — pending CPA confirmation**; adequacy and fair presentation are the professional's call.
**Output.** A treatment selection matched to the governing standard, a disclosure set mapped to requirements, a non-GAAP reconciliation where relevant, and internal-control notes.
**Quality bar.** Each treatment cites the ASC/IFRS standard that governs it; disclosures are matched to their requirement; non-GAAP measures are reconciled; controls are noted as awareness, not audited — and adequacy is left to the CPA.

## Worked example (illustrative)
*Illustrative only — hypothetical facts.* A software company closes its quarter. The method: (1) **analyzes** a multi-element customer contract under the **ASC 606** five-step model and books deferred revenue, and records a new office lease as a right-of-use asset and liability under **ASC 842** — every entry balanced, judgment items flagged; (2) posts **adjusting entries**, prepares the income statement, balance sheet, and cash-flow statement so they **articulate**, clears the bank and subledger **reconciliations**, and assembles the close checklist — all marked unaudited draft; (3) **selects treatments** against the governing ASC topics, drafts the revenue and lease **note disclosures**, reconciles an adjusted-EBITDA measure under **Reg G** discipline, and notes the **COSO** control gaps for management. Everything is unaudited and candidate-pending-review. **No audit opinion, tax position, or fair-presentation conclusion is reached** — a licensed CPA reviews and owns those.

## Guardrails & escalation
- **Route to the licensed professional:** any audit or attestation, tax filing or position, or sign-off on fair presentation belongs to a licensed CPA or tax adviser — this method prepares and structures the accounting, it does not opine, certify, or file.
- **Material and complex treatments escalate:** significant judgments (revenue with variable consideration, impairment, business combinations, consolidation, complex leases) are flagged candidate-pending-review and confirmed by the CPA, never concluded here.
- **Unaudited by construction:** every deliverable is labelled unaudited draft; it is not evidence of fair presentation and is not a substitute for an audit.
- **Framework and standard currency:** US GAAP and IFRS differ and both change; every treatment carries its ASC/IFRS reference and a verify-against-current-standard flag. Confirm the applicable version and treatment with the CPA before reliance.

## References & sources
- **US GAAP** — **FASB Accounting Standards Codification (ASC)**, including **ASC 606** (revenue from contracts with customers) and **ASC 842** (leases), and the topic that governs each treatment.
- **IFRS** — **IASB** standards (e.g., **IFRS 15** revenue, **IFRS 16** leases, and the applicable IAS/IFRS), and known US-GAAP-vs-IFRS differences.
- **AICPA** professional standards and Code of Professional Conduct; **SEC Regulation S-X** (form and content of financial statements) and **Regulation G** (non-GAAP measures) context.
- **Internal control** — the **COSO** Internal Control–Integrated Framework, as awareness for management. Standards change; verify every treatment against the current guidance and confirm material judgments, audits, and tax positions with a licensed CPA.

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*Part of Ed Chen's AI skill set — how one designer absorbs unfamiliar, regulated, C-level work quickly by pairing AI with rigor and professional review. https://edwson.com*