Working capital is widely misunderstood

Accounting framework showing components of working capital

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 helpful—we don’t have non-working capital, but working capital suggests that it works and the rest of capital doesn’t. “Capital” is ambiguous and slippery—if you hear… Continue reading Working capital is widely misunderstood

The nature of equity

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

Of the five financial statement elements, equity is the most mercurial. In part, because it's a function of recognised assets less recognised liabilities, simply expressed in this form of the accounting equation. Assets – Liabilities = Equity (net assets) It’s this residual aspect of equity that makes balance sheets balance. They balance because equity is… Continue reading The nature of equity

Top 5 most confusing things about accounting

At Accounting Cafe we’re discussing how we help our students ❤️ accounting. Accounting terms that we take for granted are confusing for students. Thinking about this in your teaching can make their learning journey that much faster and easier.Here are my top 5 most confusing things about accounting:⁉️ An entity's most valuable assets are rarely… Continue reading Top 5 most confusing things about accounting

Concept maps in Accounting Education

Presentation by Toby York TACTYC Virtual Annual Conference on 15 May 2021 1. Background paper My presentation is based on a draft paper The benefits of concept mapping in accounting education [PDF] which is in three parts. Part one: identifies some common problems with current accounting education practices, drawn mostly from personal and anecdotal experiences.… Continue reading Concept maps in Accounting Education

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 in three parts. Part one:… Continue reading Concept mapping and playful learning through ‘Colour Accounting’

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 goodwill brings the student in front of a number of difficult questions and misconceptions in accounting, such as the nature of an asset and the different accounting treatment of… Continue reading Goodwill explained in three words