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CPA Exam FAR Governmental Accounting: Measurement Focus and Basis of Accounting for the General Fund - YouTube
Channel: SuperfastCPA
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in this video from super-fast CPA we are
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going to cover the measurement focus and
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basis of accounting for governmental
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accounting again in super-fast CPA
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fashion we're gonna go straight into
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example problems because I think that is
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the best way for you to learn the
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information instead of just going
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through a bunch of slides kind of in
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textbook format and going through all
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the information it sticks in your brain
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better by going through questions first
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so example problem one which of the
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following would not be accrued as
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revenue by the general fund of Raccoon
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City would it be sales tax collected by
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merchants State held sales tax that will
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soon be remitted to Raccoon City
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property taxes levied or interest and
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penalties on delinquent taxes so which
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of the following would not be accrued as
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revenue so take a second pause the video
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and read through these responses even if
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you're brand new to government
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accounting and just just think about
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each one and then and then just make a
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guess and obviously if you're new to
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this that's all you're doing right now
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is just guessing but it helps you learn
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the material and the answer will stick
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in your brain much better if you've
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actually tried to read through the
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responses and you at least make a guess
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before you go on ok so we're going on
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now the answer is sales tax collected by
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merchants so here's the explanation the
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sales tax that is collected by merchants
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and then remitted back to Raccoon City
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that would not be accrued it would be
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recognized as revenue when those funds
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are actually received by the city sales
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tax being collected by merchants is not
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measurable or available until it's been
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given back to the city so under modified
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accrual accounting which is what general
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funds operate under revenue isn't
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recognized unless it is number one
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measurable and number two available
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revenue that can be accrued needs to be
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measurable and then to be considered
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available it needs to be legally do
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prior to the receipt of cash meaning
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that it
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needs to be due within the current
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period so items that fit that
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description would be something like
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property taxes or interest and penalties
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on delinquent taxes investment revenue
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taxes collected by other government
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entities but have not yet been remitted
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such as the state collecting sales tax
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that will be soon remitted to Raccoon
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City even though they haven't received
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that that is something they would accrue
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also like property taxes those are
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levied they are legally due from the
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citizens within the current period so
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those would be accrued as revenue as
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well now there's also the 60-day rule
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and this just adds on to this part about
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being legally do so if something is
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legally due within the current period
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they can count that as revenue but also
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if they expect to receive it within the
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first 60 days of the next fiscal period
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or the next fiscal year
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they can count that as revenue for the
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prior year going on to example problem
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number two which of the following is the
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measurement focus of governmental fund
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accounting is it economic resources
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current financial resources expenditures
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of resources or encumbrance accounting
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again pause the video read through those
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responses think about what the words
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actually mean and then make your best
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guess all right moving on the answer is
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current financial resources governmental
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funds use the modified accrual basis of
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accounting which focuses on current
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financial resources revenues are
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recognized when they are measurable and
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available so the types of governmental
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funds are number one the general fund
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two would be special revenue funds three
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would be debt service funds for would be
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capital project funds and five would be
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permanent funds so within government
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accounting or governmental accounting
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there are three different types of funds
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there are governmental funds which is
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what we're talking about but then there
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are proprietary funds and fiduciary
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funds and those two types use full
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accrual accounting or what you're used
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to in the
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proprietary funds and fiduciary funds
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focus on economic resources that means
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revenues are recognized when they are
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measurable and earned and again contrast
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that with the measurement focus of
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current financial resources which
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governmental funds use which is
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measurable and available
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moving on to example problem three
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Corona City levied 1 million of property
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taxes based on prior year collection
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rates the city estimated that a hundred
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thousand of the property taxes would be
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uncollectible based on this information
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what account and for what amount would
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the city debit for the property tax levy
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would it be revenue for 1 million
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revenue for 900,000 property tax
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receivable for 1 million or property tax
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receivable for 900,000 take a second
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pause the video read through these
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options and make your best guess moving
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on
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the answer is property tax receivable
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for 1 million so here's how this works
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the levy was for a million so Corona
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City would debit property tax receivable
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for that 1 million dollars the credit
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would then be to revenue for 900,000
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because he do have a hundred thousand of
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estimated uncollectible taxes and that
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would go as a credit to the allowance
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for uncollectible taxes for one hundred
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thousand so as a side note here if
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you're really thinking about this you
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might be wondering well just because
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they levied the taxes the taxes aren't
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available when they pass the levy and
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that's correct
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so again the actual funds from the taxes
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aren't available right then and there
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but the government can accrue the likely
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collectible amount as revenue again if
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the amounts are legally due within the
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period or by the end of the period or
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again you know the 60 day rule within
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sixty days of the end of the current
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period so remember that available can
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also mean any amount that is legally due
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by the end of the period so forms of
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taxes where those get web Eid or past
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where the taxpayer owes a certain amount
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in taxes that's legally due within the
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current period those would be amounts
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that can be accrued as revenue here is
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what the full entry would look like you
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have a debit to property tax receivable
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for a million then you credit revenues
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for 900,000 and you also credit the
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allowance for uncollectible taxes for
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100,000 moving on to example problem
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number four in the previous year Corona
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City recorded revenue of 50,000 for
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licenses and fees collected in the
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general fund in the current year Corona
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has $60,000 budgeted for licenses and
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fees based on these facts how much
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revenue would the city record for
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licenses and fees in the current year is
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it 10,000 50,000 60,000 or it depends on
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how much the city actually collects take
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a second read the question again think
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through it pause the video and when
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you've made your guests then move on so
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moving on
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the answer is it depends on how much the
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city actually collects general funds use
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the modified accrual basis of accounting
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as we've talked about and to record
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revenue the revenue has to be one
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measurable and to available now for
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something like licenses and fees they
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aren't measurable and available until
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they are actually collected so the city
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wouldn't record any revenue until the
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licenses and fees have actually been
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collected so the total amount of revenue
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from licenses and fees depends on how
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much the city actually collects it
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doesn't have anything to do with the
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prior year or the budgeted amount the
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final entry would just be a debit to
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cash for the collected amount and then
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the same amount would be credited to
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revenue now if this is your first video
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you've ever come across from super fast
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CPA we are really big on the how behind
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your study process because everyone out
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there has a review course everyone out
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there is kind of doing the same thing
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they're trying to watch the video
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lecture read the chapter and then go to
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the questions but across the board 50%
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of people fail their exams so why is
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that it comes down to how you study when
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you have a few hours to study each day
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are you actually spending that time we
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have a free training that we do several
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times a week we call these our study
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hacks training sessions we will walk you
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through exactly what to do when you sit
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down to study so that there's no
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guesswork you don't feel like you're
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spinning your wheels and you will learn
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how to do a two-hour main session
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because our whole thing is solutions for
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busy CPA candidates so people that are
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working full time and still trying to
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pass their exams you will learn on this
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training how to have a two-hour main
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session with your review course and on
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weekdays that's all you need to do so on
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these sessions you will learn how to
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have a two-hour session that's more
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effective than someone studying four to
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five hours the normal way so to register
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for one of these free training sessions
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go to superfast CPA com slash pass now
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or you can just text the word pass now
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as one word two four four two two two
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and we will send you back a link what I
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always say about these trainings is this
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is one hour that can literally save you
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months and months of time and
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frustration from trying to figure out
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this process on your own and save
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yourself hundreds of dollars from
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avoiding failing sections you'll find
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this training incredibly helpful and it
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will take you from feeling confused or
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overwhelmed with the study process to
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feeling relieved and confident that you
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can actually do this and pass your exams
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so to register for one of these sessions
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there's also going to be a link down
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below in the description or again go to
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that URL or just text pass now two four
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four two two two thanks for watching
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