Concepts

Understanding the concepts on which accounting practice is built

Although accounting regulators publish conceptual frameworks, we believe that students require a broader and more critical introduction to accounting. Our articles make no assumptions about prior knowledge and explain the practical and theoretical contexts of accounting concepts.

The origins of accounting

Summary: The origins of accounting are uncertain, various, and remain a mystery in parts of the world. However, one tantalising theory for its development in Western culture begins in Mesopotamia and is tied up with the invention of agriculture. The history of accounting is deeply entwined with the history of…Read more

Dual coding in accounting education

Summary: A simple way to embrace dual coding in accounting education is to use a concept map. This “almost certainly” improves learning. Don’t reinvent the wheel: there’s a free one that you can adapt, copy and distribute. Give credit to its creators. This is the BaSIS Board. It combines words…Read more

Inside the Long Itchington Wood HS2 tunnel

Accounting during periods of general inflation

Historical cost accounting has its advantages but presents serious problems in periods of inflation. In Autumn 2022, the board in charge of the £100bn project to build HS2, the UK’s high speed railway, was criticised for using 2019 prices to report its current spending. This had the effect of reducing…Read more

Students protesting with a banner "Planet over profit"

Students need to understand that accounting is political

You may not think that accounting is political or that accountants should meddle in economics and politics. After all, their job is to report objectively on the performance and condition of corporations. Faithful representation, as we know, requires neutrality. Corporations, however, are social inventions and financial reports are never passive…Read more

More tips on teaching measurement

Accounting students are understandably keen to put numbers next to everything. But often our students don’t understand why and how numbers are attached to words in financial statements. IFRS uses the term ‘measurement’ (rather than ‘valuation’) to describe the process of quantifying resources and obligations. Measurement allows us to describe…Read more

The accounting concept of measurement

Classification

When accounting students understand that classification of assets and liabilities is an important step towards deciding how to report events, then they appreciate the importance of professional judgement in accounting. Here are some tips for teaching classification. …Read more

Working capital is widely misunderstood

Working capital is a widely used but often misunderstood term. To teach it well, the term needs careful scrutiny. The problem starts, as it usually does, with language. ‘Working’ isn’t a helpful term. Working capital suggests that this capital works, and the rest of it doesn’t. ‘Capital’ is ambiguous and…Read more

A pictorial presentation of a balance sheet showing assets of £50,000, liabilities of £30,000 and equity of £20,000.

The nature of equity

Of the five financial statement elements, equity is the most mercurial. In part, because it’s total amount is measured as the total of recognised assets less the total of recognised liabilities, expressed in this form of the accounting equation. Assets – Liabilities = Equity (net assets) Measuring total equity as…Read more

face of a confused woman pressing her hands into her cheeks.

Top 5 most confusing things about accounting

At Accounting Cafe we’re discussing how we can clear up the confusing things about accounting. Terms that we take for granted are confusing for students. Make their learning journey faster and easier using these simple tips. Here are our top 5 most confusing things about accounting: 1. The most valuable…Read more

Teaching liabilities

Paul Jennings gives some useful tips and sequences for teaching liabilities. The elements of financial statements are the building blocks of financial statements. If your students understand what the elements are then they will understand the basis for reporting events in financial statements. Those elements – assets, liabilities, equity, income…Read more

Man with protective headgear carrying a strimmer through a garden

The nature of income

Dictionaries, from an accounting perspective, invariably provide an incorrect and conflated definition of income. …Read more

The nature of assets

The elements of financial statements are the building blocks of financial statements. If your students understand what the elements are then they have a good basis for understanding how events are reported in financial statements. Those elements – assets, liabilities, equity, income and expenses – are key to understanding financial…Read more

The nature of expenses

Expenses are a perfect illustration of how accounting uses common language in specific and uncommon ways. …Read more

Accountants can help save the world

Dr Todd Sayre believes that accounting is not only broken but is contributing to the destruction of the planet. He is calling on accounting academics to help fix this. …Read more

Interior of engineering works at London and North Western Railway, Crewe, Cheshire

The nature of depreciation

Paul Jennings gives some tips on how to explain the nature of depreciation. …Read more

Concept maps in accounting education

Presentation by Toby York TACTYC Virtual Annual Conference on 15 May 2021 1. Background paper My presentation, in three parts, is based on a draft paper, The benefits of concept mapping in accounting education [PDF]. Part one: identifies some common problems with current accounting education practices, drawn chiefly from personal…Read more

Concept mapping and playful learning through ‘Colour Accounting’

Presentation by Toby York at the Games and Simulations in Accounting and Finance Education (‘GSAFE’) conference hosted by Aston University on 20 April 2021 The benefits of concept mapping in accounting education My presentation is based on a draft paper The benefits of concept mapping in accounting education, which is…Read more

Explaining “qualitative characteristics” from the IFRS Conceptual Framework for Financial Reporting

Helping students to understand, rather than just memorise, IFRS principles. This article is also relevant to FASB’s Statement of Financial Accounting Concepts No. 8: Conceptual Framework for Financial Reporting. The IFRS Conceptual Framework underpins what international financial reporting standards say and why they identify a particular accounting treatment. Students must…Read more

Six young people sitting around a dining table

There’s no such thing as a prepayment

The battle to remove “prepayments” from accounting vocabulary is probably not winnable, but we can help our students by being clear about how we describe them. …Read more

Goodwill explained in three words

Goodwill represents those ‘unidentified flying assets’ that can’t be individually identified. Goodwill is one of those slippery concepts that accounting students can find confusing. Accounting for it brings the student in front of a number of difficult questions and misconceptions in accounting, such as the nature of an asset and the…Read more

Games & simulations in accounting and finance education (GSAFE)

Aston Business School’s virtual conference takes place on 20 April 2021 The GSAFE virtual conference explores games, simulations and playful learning in accounting and finance education. The themes cover pedagogical techniques in learning, teaching practice and research. Plenary presentations: Professor Jordi Carenys (EADA Business School) Matt Davies (Aston University) Susan…Read more

Assets are rights

With gratitude to Paul Jennings for this clever idea. Some students find it difficult to appreciate that assets are rights, not things in and of themselves. I used to tell students that in the old days we put motor vehicles on balance sheets but they kept falling off. It didn’t…Read more

A concept map showing the five finacial statement elements and their relationships to each other

Why concept mapping is important

A version of this article was first published on LinkedIn on 30 July 2020. Concept maps are visual representations of information that show everything in a single view. They help students to create a clear mental model, which clarifies their thoughts and provides a shared language of understanding in a…Read more