An International Meeting of the American Accounting Association 2005 Annual Meeting August 7–10, 2005 San Francisco, California Come to the City by the Bay!

Effective Learning Strategies Forum
Wednesday, August 10, 2005

Session 19
Teaching Accruals and Deferrals Using the REA Database Model

Presenter:
Barbara Ross, Eastern Michigan University

Description:
Many students in the first introductory financial accounting class struggle with the concept of accruals and deferrals. Additionally, many schools have adopted the REA (Resource Event Agent) method of teaching databases in their Accounting Information Systems (AIS) classes and some have adopted this "systems" approach throughout the curriculum. This session seeks to mold these two approaches together to give students an alternative way of understanding accruals and deferrals. In the REA Approach, timing differences are of the utmost importance. They define the way a business works. Therefore, in the relationship between Sales and Cash receipts, for example, it is easy with an REA diagram to distinguish whether a firm allows accounts receivable, whether they allow installment payments, whether you can pay on account (accounts payable are allowed), etc. These are all based on timing differences. Showing these simple REA diagrams and explaining to students that the need for an accrual or deferral is simply a matter of a timing difference in the accounting system should help them understand the difference between the cash and accrual basis of accounting, basic accruals and deferrals in accounting, and an introduction into the REA database model.

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