The simple mechanics of an accounting information system: a pedagogical and analytical tool

This paper introduces PlayAcct, a double-entry accounting system in miniature. PlayAcct is simple enough so that students can “look under the hood” and see how it works, but also realistic and user-friendly enough to be useful for professionals. In the classroom PlayAcct can be used to illustrate how information flows from ledger to financial statements and how financial statements are interconnected. In the “real world” PlayAcct can be used to perform transaction analysis and to examine the impact of converting a business from cash-basis to accrual-basis accounting. (Seattle, March 2007)

How to recover when simultaneous equation solutions break down

The ability to solve simultaneous equation systems without any more effort than being aware that simultaneous equations are present is one of the most convenient and powerful features of Excel. This feature is very useful, for example, when building financial forecasting models. There is one serious drawback, however: if a single variable included in the simultaneous part of the model assumes a non-numeric value, such as #DIV/0!, then large sections of the worksheet can become corrupted. (Seattle, July 2006)

Wal-Mart Stores: a case for teaching advanced Dupont analysis

The objective of this case is to help develop students’ understanding of financial ratios, their ability to “discover” the story told by ratios, and their ability to write a persuasive report on their findings. It illustrates the importance of management’s discussion and analysis for explaining the behavior of ratios while alerting students to the fact that official company statements are not necessarily unbiased or complete descriptions of the company’s performance. At a time when Wal-Mart’s performance is constantly discussed in the media, the case piques students’ interest and invites them to evaluate media commentary.

Preparation of the statement of cash flows

Finance theory and generally accepted accounting principles differ with respect to the proper way to measure cash flows. The accounting technique predominantly used to prepare the statement of cash flows is beset by inconsistencies, measurement errors and complexity. We propose a new technique that breaks down preparation of the statement of cash flows in two stages: the first yields a statement consistent with finance; the second a statement consistent with GAAP. Our proposal has two advantages over the traditional technique: it is simpler and generates a statement useful for business valuation purposes. These are important advantages at a time when accountants face a high demand for business valuation services. (Seattle, February 2006)