A Business-World Approach To Accounting Principles

Michael Toerner and Elizabeth Finch
Southern University

Executive Summary

The authors believe that the first Accounting Principles course should provide students with a realistic picture of business-world accounting. In the authors' opinion, however, such a picture does not result from teaching all aspects of a given topic nor does it result from teaching the intricacies of double-entry bookkeeping. Rather, the authors believe that a realistic picture of business-world accounting results from:

1. Covering the most common business transactions (merchandise purchases and sales, cash disbursements, payroll, etc.) to an extent that is suitable for students who are often being exposed to accounting for the first time
2. Presenting accounting topics within the context of a single business
3. Presenting accounting topics in the order in which they occur in the business world
4. Recording transactions in the journals in which such transactions are actually recorded, but arranging the journals in the format of the accounting equation rather than the typical "debits = credits" format
5. Introducing students to the use of debits and credits

The authors' approach is based on the operations of a real company -- a closely-held business that sells pet supplies to retail customers. The materials that the authors use have been published by Houghton Mifflin Custom Publishing and are organized as follows:

Unit I -- Introduction to Accounting

Unit II -- Starting a Business:

A. Evaluating an existing business
B. Purchasing an existing business
C. Types of business entities
D. Source documents
E. Accounting principles and assumptions

Unit III -- Operating a Business (Monthly Procedures):

A. Transaction analysis
B. Recording transactions in special journals

Unit IV -- Operating a Business (Month-end Procedures):

A. Posting to the general ledger
B. Bank reconciliation
C. Journal entries to record reconciling items

Unit V -- Operating a Business (Year-end Procedures):

A. Trial balance
B. Adjusting entries
C. Financial statements

Comments from students indicate that the authors' approach has increased students' understanding of and appreciation for accounting. These comments are supported by a comparison of student performance in Fall, 1998 (the first semester in which the authors' approach was used in all sections of Accounting Principles I) with student performance in Fall, 1997 (in which a traditional approach was used). When performance is defined as exam scores, 63% of students in Fall, 1998, earned A's, B's, or C's compared with 4% in Fall, 1997.

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