My FAR Study Approach: How I Passed with a 95

Plus an Intro to Governmental Accounting

Intro

The FAR exam can be daunting, given both the quantity of content and the wide range of topics. This article will walk you through my study approach for FAR along with a brief intro to governmental accounting!

Back in 2019, I passed the FAR exam with a score of 95. I also scored a 98 on BEC, 91 on REG, and 90 on AUD. So I decided to launch Maxwell CPA Review to help students pass the CPA exams. Let’s now jump into the content!

My Study Approach

Throughout my 8 weeks of studying for FAR, I spent 2.5 hours studying each day Monday–Friday and 5 hours each day Saturday–Sunday, totaling around 22 study hours a week. So I studied a total of around 180 hours for FAR.

What’s the difference between the Monday–Friday study routine versus the Saturday–Sunday routine? Monday through Friday, I focused solely on new content by watching new video lectures, doing a few practice questions, and creating a summary outline of what I was learning. Then on the weekend, I first reviewed the content I learned during the week by reviewing my study outline, and then I did as many practice problems as possible.

Governmental Accounting

Governmental accounting alone can make up 5–15% of the FAR exam content, so I will explain governmental accounting and what makes it different from for-profit accounting (i.e., GAAP accounting).

Governmental accounting can be challenging even for someone with years of experience in public or private accounting. Why? Because for-profit company accounting (i.e., GAAP accounting) is quite different from governmental standards issued by the Governmental Accounting Standards Board (GASB).

Governmental accounting is all about accountability. Since the government’s funds come from the general public, then governmental accounting attempts to increase confidence in how those governmental funds are used.

Governmental fund accounting follows the modified accrual method, meaning that most items are simply cash-basis with a few exceptions. For example, with property taxes, you’re allowed to record a receivable, as long as you plan to collect it within 60 days after year-end.

When the government purchases capital assets (e.g., vehicles, buildings, etc.) then it records the entire amount as an expenditure right away. Under the modified accrual method, capital assets are not depreciated or amortized. The entry would simply be a debit to Expenditure–Capital Outlay and a credit to Cash or Vouchers Payable.

Interperiod equity is a key part of governmental accounting, which means the government only focuses on current-period inflows of resources and current-period costs of services. Each year, governmental accounting requires a beginning-of-year entry for budgeting, which is reversed out at the end of the year. This entry attempts to estimate the expected inflow of resources (estimated revenues and other financing sources) and outflow of resources (appropriations and other financing uses).

Now let’s talk about the five funds within governmental accounting. The general fund is for the daily operations of the government. It’s also a catch-all account, meaning that if an item doesn’t fit into any of the other funds, it’s put in the general fund. The special revenue fund is used to track revenue for a specific purpose. For example, if a city uses the revenue from red-light tickets for the purpose of education, then those funds would be recorded in the special revenue fund.

The capital projects fund is for the construction and acquisition of capital assets, such as for buildings and equipment. The debt service fund is to pay both the principal and interest of the government’s debts. Lastly, the permanent fund is for resources that cannot ever be expended. The interest from these resources is used for a particular purpose, designated by whoever provided the resources.

Conclusion

In this article, we have talked about my approach to the FAR exam, along with a brief explanation of governmental accounting. I hope that reading this article has put you one step closer to passing the FAR exam!

About the Author

Kyle Ashcraft is a CPA that scored a 90+ on all four CPA exams. Kyle founded Maxwell CPA Review, which is an exam-prep company that offers video courses and private tutoring. Kyle can be reached at MaxwellCPAreview@gmail.com or by visiting MaxwellCPAreview.com.