Accounting is not just bean counting

A large (approximately 8 feet in height) example of fei (or Rai) stone in the Yapese village of Gachpar
This isn’t the kind of money you can bend down to pick up. Fei stones. Image © Wikipedia, CC BY-SA 3.0, Original file

This is a brief introduction to the nature of money and its relationship with accounting. It’s not comprehensive, but it’s a fun way to introduce accounting to a new audience: ice-breakers, introductory sessions, or school talks. It makes learners think more carefully about money and differently about accounting.

Accounting isn’t just about counting beans— it makes them too. It may be hard to believe, but real money is created with a nifty bit of double-entry bookkeeping. To understand how this works we need a close look at those beans—the money.

Banknotes and coins are money but physicality is not the defining feature of money. This is clear from the “invisible money” that we use every day hiding in our plastic cards, mobile phones and computers.

Invisible money is not a recent phenomenon. The history of civilisation is scattered with examples of economies flourishing without physical money. For example, the Pacific island of Yap, which was largely isolated from the rest of the world until the late nineteenth century, used giant immovable “fei” stones to support a credit economy. John Maynard Keynes described its ideas about currency as “more truly philosophical than those of any other country” [1].

It’s difficult to say how much invisible money exists, not just because it changes all the time, but definitions are hard to pin down—just ask an economist. Or an accountant. Or yourself. Would you include cryptocurrencies [2], long term deposits, short term government bonds? Whatever the definition, banknotes and coins are likely to make up less than 10% of the world’s money supply.

The defining feature of all invisible money is that it exists only as a balance—a record in an accounting system. Whether it’s on a screen or on paper is not what matters—money is, in essence, no more than a mark of a promise.

An example will make this clearer.

Yana wants to buy a car but doesn’t have enough cash. She thinks that a bank might have some, so she asks Big Bank for £1,000.
The bank agrees and Yana signs a loan agreement after which £1,000 magically appears in her current account. She now has £1,000 more cash, and an obligation of £1,000 to the bank. In her accounting records, assets and liabilities both increase by the same amount.

The bank’s accounting records are even more interesting, because this is where the magic happens—well, the conjuring trick— because the bank doesn’t go to its cash cupboard in order to stuff Yana’s pockets with money. It makes an accounting entry. And that’s it—the money appears from nowhere.

Here’s the loan to Yana from the bank’s point of view. Yana’s obligation—the loan—is recoverable by the bank, so it’s valuable. It’s an asset. Big Bank’s asset is Yana’s liability.

The increase of £1,000 in Yana’s current account is in liabilities—it’s the £1,000 that Big Bank has agreed to make available to Yana. Yana’s asset is Big Bank’s liability.

The bank has created cash (and the loan) using double-entry bookkeeping. It really is that simple: Yana owes us, so we owe Yana—boom!—£1,000 is now in the economy that wasn’t there before.

Don’t be fooled into thinking that anybody can do this [2]. It only works because we all believe that the balance on Yana’s current account is cash. Because we believe, Yana can easily transfer that balance to someone else, or go to an ATM to withdraw the balance as physical money.

Being able, at will, to convert invisible money into physical money maintains our belief in the magic, but this, to some extent, is also illusory. The banking system will collapse if everybody simultaneously goes to the banks to convert their current account balances into cash — there’s not enough physical cash in the world for that.

Governments understand that our trust in money and the banking system are important threads that hold the fabric of society together, which is why they do almost anything — as they did in 2007/08 — to keep the banking system functioning.


The Bank of England has published a series of articles and videos that deal with this topic in a broader context:

Notes and further reading

[1] I recommend Felix Martin’s Money: the unauthorised biography (Bodley Head, London 2013). In fact, Martin’s book is a wonderfully readable treatise on money as an accounting mechanism. 

[2] In the absence of an accounting standard for cryptocurrencies, the existing standards are applied. Cryptocurrencies fail the definiton of cash equivalents under IAS 7 Statement of Cash Flows. Neither are they financial instruments under IFRS 9 Financial Instruments. This leaves them, for the time being, under IAS 38 Intangible Assets. [For a more detailed explanation, see this ACCA Technical Article: Accounting for cryptocurrencies.

[3] Although lots of people did exactly this during the Irish banking crisis of 1970 when the banks closed and people were forced to exchange personal IOUs in the absence of the cash and bank clearing. Again, see Money: the unauthorised biography by Felix Martin for the full story.

[4] This isn’t any more real than a bank balance. In the UK, all banknotes issued by the Bank of England make this declaration “I promise to pay the bearer on demand the sum of £X”. This dates from a time when the person holding the note could exchange it for gold of the same value. Sadly, you can no longer do this. You can only exchange your banknote for other banknotes of the same face value. That is, you can swap one paper promise for another paper promise.

From unrequited love to sleeping with the enemy

This Accounting Cafe online seminar on 25 March 2022 explored the future relationship between universities and the professional accounting bodies.

Our guests argued that to protect the future of accounting education a new social partnership is necessary between universities and the professional accounting bodies.

A significant problem is the current accreditation system which constrains accounting academics, risks academic freedoms and suppresses innovations in teaching, learning and assessment.

They claimed that university programmes dominated by professional development learning outcomes deprive students from obtaining essential critical skills better suited to employment opportunities and their future careers.

Their conclusion is that academia and the professional accounting bodies cannot survive without each other, but both must be willing to answer difficult questions and accept constructive criticism.

Their paper, From unrequited love to sleeping with the enemy: COVID-19 and the future relationship between UK universities and professional accounting bodies was published in the Accounting Research Journal in October 2021.

This was interesting session with wide-ranging views from academics, professional accounting bodies and students.

Presentation: Umair Riaz, Mo Al Mahameed and Lara Gee

Seminar hosted by:

  • Dr Muhammad Al Mahameed, Assistant Professor in Managerial Economics and Management Accounting at Copenhagen Business School Muhammad and Visiting Assistant Professor at College of Business Administration at the University of Sharjah, having previously been a lecturer in Accounting, Sustainability and Entrepreneurship in the Department of Accounting at Aston University. Before that he worked in investment banking, auditing and accounting firms in the UK and Syria. Muhammad is currently leading the ‘RWAD’ project, which is primarily designed to supply the disadvantaged Entrepreneurs with financial and analytical skills.
  • Lara Gee, Associate Dean Post Graduate Studies for the College of Business and Social Sciences at Aston University, Birmingham. Lara has worked in professional training and higher education for the past 15 years and specialises in taxation, audit and accounting. Previously she has worked in audit for PwC and The Audit Commission.
  • Dr Umair Riaz, Lecturer in Accounting at Aston University.


Paper: From unrequited love to sleeping with the enemy:
COVID-19 and the future relationship between UK universities and professional accounting bodies

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Innovations in accounting education

Accounting Cafe online seminar on 17 February 2022

This Accounting Cafe seminar was hosted by Susan Smith, an innovative and prize-winning accounting educator and Associate Dean at University of Sussex Business School.

Here are 50 minutes of ideas and practical suggestions to help you to deliver innovative accounting teaching, learning and assessment. This is followed by an informal discussion and experiences from other enthusiastic accounting educators from across the world.

02:51Policy and external influences
04:00Accounting curriculum tensions
12:45Homogenisation of the accounting curriculum?
13:29The purpose of innovation
14:41Active learning pedagogies
    — 16:16    — Team based learning
    — 20:53    — Problem based learning
        – 22:24        – Case method
        – 27:55        – Simulations
        – 29:41        – Simulations: gamification
        – 32:08         – Role play
    — 33:29    — Service learning
    — 44:39    — Summary
45:07Pedagogical lens
    — 45:18    — Phenomenon based learning
    — 46:11    — Storytelling
    — 47:52    — Cross cultural learning

Before introducing changes

Susan ackowledges that innovating can be overwhelming and is certainly effortful, so she advises not to innovate simply for the sake of change. Rather, set out clear reasons for innovating and determine what success looks.

Good reasons to innovate include embedding employability skills, or implementing measures to narrow awarding gaps across ethnicities and social inequalities, to increase student retention, to maintain learning outcomes and/or contribute to the university’s other strategic goals.

An additional complication might be that your modules qualify for professional accreditation and must therefore meet syllabus prescriptions to maximise available exemptions and, at the same time, you want your teaching to be distinctive.

Oh, and be sure to enhance student experience while you’re at it!

Active learning

Active learning provides great opportunities for academics to build expertise in specific teaching areas, but the overarching aim is to engage students productively, and research shows that this can benefit all students (Freeman et al, 2014).

Active learning can be interpretated in different ways and covers a broad range of pedagogies. This article provides a small sample of possibilities.

Team based learning

Students are put into small groups which remain in place for the entirety of the module. Before coming to class, each student undertakes individual preparation and completes an Individual Readiness Assurance Test (IRAT) consisting of short answer or multiple choice questions. They then review their answers to those questions in their groups during which they negotiate and submit agreed answers to the same questions: the Team Readiness Assurance Test (TRAT).

Answers provided in the IRAT and TRAT are reviewed by the teacher and class time is used to fill in knowledge gaps and using exercises to apply and extend learning.

Team based learning is widely used across different insitutions which has been shown to reduce awarding gaps and helps to promote collabortion and engagement. Effective implementation requires careful planning and consideration. It requires a lot of upfront work and to be effective must be implemented throughout the module. Research indicates that team based learning improves students’ academic performance, reduces some achievement gaps, and enriches the learning experience (Cagliesi & Ghanei, 2022).

More information: Team-Based Learning Collaborative (TBLC)

Problem based learning

Problem based learning is an umbrella term used to refer to case method, role play and simulations. It develops critical thinking, problem solving and communication skills. It also supports embedded employability skills.

The problem might be a current news stor or a teacher created problem. To be effective it must engage and motivate students to seek out a deeper understanding of concepts. The problem should require students to make reasoned decisions and to defend them and incorporate the content objectives in such a way as to connect it to previous knowledge.

1. Case method

Cases describe real-world scenarios often centred around a specific problem challenge or dilemma. The case method provides an opportunity for students to consider and apply concepts in a practical context. Faculty members with experience or connections with the profession or industry can write their own cases which may also be submitted for publication, for example, Issues in Accounting Education and Accounting Perspectives.

It may be more effective if embedded throughout the module but can also be adopted on an ad hoc basis.

Capstone assessments allow students to demonstrate attainment of learning outcomes over multiple modules (or even an entire year of study) in a single assessment. A case study can provide an excellent foundation for this type of assessment.

There is a lot of support for teachers looking to adopt the case method. The Case Centre provides resources, training and scholarships for new teachers to case teaching. Published cases also attract royalties.

More information: The Case Centre

The Case Centre: scholarships

Harvard Business Review (webinars)

The Case Journal

2. Simulations

Simulations allows students to practice decision-making in a ‘safe’ environment and requires them to focus on specific learning points.

There aren’t many simulations available for accounting and most of those are “off the shelf”, so may not be suitable. There is a cost consideration too.

A specific type of simulation is games based learning (or gamification):

  • Monopoly has been used to help students prepare for an accounting exam (Bergner & Brooks, 2017)
  • The Colour Accounting Learning System uses a board and activities as the basis for demonstrating accounting concepts
  • AccountinGame is a quiz like board game used in classes (Silva, 2021)
  • LegoSerious Play could be used to create an accounting simulation.

There are also various apps and online simulations.

More information: LegoSerious Play

Colour Accounting

Financial Education for Future Entrepreneurs (FEFE)

3. Role play

Role play is a valuable approach that is not much used. It requires students to take on a role and to consider a scenario or problem from that perspective and to communicate and interact with syudents in other roles.

This is better suited to smaller cohorts. A good illustrative example relates to audit education (Powell et al., 2020).

Service learning

Service learning is also referred to as real world, authentic or experiential learning. Students are given access to a real problem and can provide them with the opportunity to add value.

Finding and managing projects is time intensive and scaleability may be problematic.

Riipen is an international platform that connects companies and students.

More information: Riipen


Bergner, J. & Brooks, M. (2017), “The Efficacy of Using Monopoly to Improve Undergraduate Students’ Understanding of the Accounting Cycle”, Advances in Accounting Education: Teaching and Curriculum Innovations (Advances in Accounting Education, Vol. 20), Emerald Publishing Limited, Bingley, pp. 33-50.

Cagliesi, G. & Ghanei, M. (2022) Team-based learning in economics: Promoting group collaboration, diversity and inclusion, The Journal of Economic Education, 53:1, 11-30, DOI: 10.1080/00220485.2021.2004276. Accessed: 23 March 2022.

Duch, B. J., Groh, S. E, & Allen, D. E. (Eds.). (2001). The power of problem-based learning. Sterling, VA: Stylus

Freeman S, Eddy SL, McDonough M, Smith MK, Okoroafor N, Jordt H, Wenderoth MP. (2014) Active learning increases student performance in science, engineering, and mathematics, Proc Natl Acad Sci USA, DOI: 10.1073/pnas.1319030111. Accessed: 23 March 2022.

Powell, L., Lambert, D., McGuigan, N., Prasad, A., & Lin, J. (2020) Fostering creativity in audit through co-created role-play, Accounting Education, 29:6, 605-639, DOI: 10.1080/09639284.2020.1838929

Sangster, A., Stoner, G. & Flood, B. (2020) Insights into accounting education in a COVID-19 world, Accounting Education, 29:5, 431-562, DOI: 10.1080/09639284.2020.1808487

Silva, R., Rodrigues, R. & Leal, C. (2021) Games based learning in accounting education – which dimensions are the most relevant?, Accounting Education, 30:2, 159-187, DOI: 10.1080/09639284.2021.1891107

Suwardy, T., Pan, G. & Seow, P-S. (2013) Using Digital Storytelling to Engage Student Learning, Accounting Education, 22:2, 109-124, DOI: 10.1080/09639284.2012.748505

Taylor, M., Marrone, M., Tayar, M. & Mueller, B. (2018) Digital storytelling and visual metaphor in lectures: a study of student engagement, Accounting Education, 27:6, 552-569, DOI: 10.1080/09639284.2017.1361848

Wahid ElKelish, W. & Ahmed, R. (2021) Advancing accounting education using LEGO® Serious Play simulation technique, Accounting Education, DOI: 10.1080/09639284.2021.1905011.

Susan is Associate Dean at University of Sussex Business School, she holds a PhD in Accounting and is a Principal Fellow of Advance HE, and an elected member of the ICAEW.

In 2021 Susan won the Learning Together Award at the University Education Awards for her work with a staff-student partnership.


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Phenomenon-based learning

Accounting Cafe online seminar on 19 November 2021

Liz Marsland, Queensland University of Technology (45 mins)

Liz Marsland is a trailblazer in phenomenon-based learning. She unpacks the methods, the challenges and the benefits to students and teachers in using this multi-disciplinary approach that has wide application across subject areas and throughout educational levels.

Elizabeth Marsland, CPA SHEA from Queensland University of Technology is a renowned TEDx speaker on phenomenon-based learning. She is passionate about innovation in accounting education.

Liz’s presentation (PPTX)

Zoom recording (45 mins)

Jenni Rose, Alliance Manchester Business School (44 mins)

Jenni Rose shares her experiences of teaching accounting through the lens of climate change. She challenges students to think about how accounting should be changed for the future and how climate change accounting works with formative and summative assessment.

Jennifer Rose, FCA BFP PGCert SFHea CMBE, senior lecturer in accounting, is the 2020 recipient of Teacher of the Year in the University of Manchester Distinguished Achievement Awards.

Jenni’s presentation (PPTX)

Zoom recording (44 mins)


Recording (45 mins): Liz Marsland — Phenomenon-based learning

Recording (44 mins): Jenni Rose — Teaching accounting through the lens of climate change

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What’s the ‘gateway drug’ for finance?

Accounting Cafe online seminar on 28 October 2021

Michael Gilmore, The Seven Dollar Millionaire

Michael Gilmore believes that we need a gateway drug to get people hooked on finance.

“The most generous estimates reckon 2/3 of the planet can’t answer some basic questions on finance, but plenty of that 1/3 have guessed their way to those answers with a bit of basic numeracy—the survey is multiple choice, so the planet is doing only slightly better than random!

I would say that 1% or less knows how to take control of their finances to the extent that they can be ‘financially free’, which would be a more meaningful goal than calculating the difference between real and nominal returns.

It can’t be anything we’ve already tried, like fear or greed, because those obviously don’t work. If they did, we wouldn’t be having this discussion.

I have two ideas, one less controversial than the other. Universal education is one. Kindness is the other. I would love to hear what you think about those – and if you have any others.”

Discussion, questions and dialogue

Michael Gilmore wrote the book “Happy Ever After” for his daughter, and “The Thousand Dollar Journal” for Singapore-based migrant workers, both under the pen-name The Seven Dollar Millionaire, which is designed to convey how small habits can compound to huge sums. He also writes the Easy Money column for UK magazine The Idler.

By day he is a fund manager, having worked in finance for almost 25 years. He has been passionate about financial education ever since joining the industry and realising how simple, powerful – but untaught – the basic principles are.


Recording of Michael’s presentation on Zoom

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Supply chain finance

Supply chain finance is making the news for all the wrong reasons. Although it is a centuries old form of finance, it has played a part in the demise of Abengoa, NMC, Carillion and most recently, Greensill.

Here is a simple slide that explains the basic concepts behind factoring and supply chain finance. Download a version for PowerPoint below.

This raises some interesting questions for students (and regulators):

  • to whom has the finance provider extended credit: the supermarket or the farmer?
  • within the financial statements of the supermarket, how should the amount owed to the farmer be disclosed?

In factoring, the finance provider extends credit to the farmer. In supply chain financing the finance provider extends credit to the supermarket. The supermarket will usually have a higher credit rating than the farmer, in which case supply chain financing will be cheaper than factoring.

Currently, the supermarket discloses the amount owed to the farmer within accounts payable (trade creditors), even though this is more like a credit line provided by a bank. There is an argument that these amounts should be included as part of debt.

Whatever your personal view, there is a strong case for better disclosure within financial statements of this type of financing arrangement and better regulation of supply chain finance.

None of this is new. As far back as 2004, the Office of the Chief Accountant at the SEC objected to entitites classifying amounts due to financial institutions as accounts payable1. The editorial board of the Financial Times called for this on 4 March 20212, and auditors have been seeking clarification from regulators for months.


Download: Supply chain finance (PPTX)


  1. Comerford R. (2004) Speech by SEC Staff: Remarks before the 2004 AICPA National Conference on Current SEC and PCAOB Developments, U.S. Securities and Exchange Commission
    Available at: (Accessed 10 May 2021).
  2. Financial Times (2021) Greensill case shows risks of supply chain finance. Available at: (Accessed 7 April 2021).
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