Using computerised business simulations and spreadsheet models in accounting education: a case study
BEST 2003 9 - 11 April 2003 Brighton The Thistle Hotel .
Neil Marriott Glamorgan Business School Glamorgan University Pontypridd CF37 1DL Tel: +44 (0)1443 482340 Fax: +44 (0)1443 482380 Email
[email protected]
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Using computerised business simulations and spreadsheet models in accounting education: a case study Abstract When teaching accounting to undergraduate students, tutors face a number of challenges. There is the challenge of “instrumentality” as students are motivated to study accountancy not because of some inherent love, or proven ability, for the subject, but for vocational reasons linked to future extrinsic reward (Ottewill, 2002). Further challenges, possibly linked to instrumentality, are in the approaches to learning adopted by some students where surface learning is favoured to deep learning. Finally, students of accounting at University often lack concrete experience to enhance their learning, possibly causing them to adopt learning style preferences favouring abstract conceptualisation. Students adopting such learning style preferences can often perform well in methods of assessment favouring theoretical aspects of accountancy. Indeed, there is evidence that many accounting tutors lack concrete experience, further endorsing the status quo. This paper outlines the use of a computer simulation in an attempt to combat some of the challenges faced by accounting educators by providing an opportunity for concrete experience in an educational setting. It argues that the use of such a simulation is more in keeping with learning theories developed in educational psychology in general and experiential learning in particular. It presents an opportunity for students to develop algorithmic thinking, to use spreadsheet-modelling skills in a realistic setting, to enhance cognition in understanding the “whole” of a business problem and to reduce instrumentality through the intrinsic enjoyment of problem based learning. Keywords: Computerised business simulations, spreadsheet modelling, experiential learning.
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Using computerised business simulations and spreadsheet models in accounting education: a case study Introduction This paper describes the use of a computerised business simulation and student prepared spreadsheet models in an undergraduate accounting course at a traditional UK university. The course was a final year option for accounting specialists entitled The Management and Finance of Small Businesses, but many of the lessons learned are applicable to a wide range of courses taught by accounting educators.
When teaching accounting to undergraduate students, tutors face a number of challenges. There is the challenge of “instrumentality” as students are motivated to study accountancy not because of some inherent love, or proven ability, for the subject, but for vocational reasons linked to future extrinsic reward (Ottewill, 2002). Further challenges, possibly linked to instrumentality, are in the approaches to learning adopted by some students where surface learning is favoured to deep learning (Newstead, 1992). Early research suggestted that different courses encouraged different approaches. E.g. deep approaches seemed to be more prevalent in arts courses while reproducing orientations seemed to be more associated in science and engineering courses (Ramsden and Entwistle 1981). However, more recent research suggests that these differences in learning orientations are present in students before they even start their studies in higher education (Jacobs and Newstead 2000).
The paper commences with a brief discussion of educational psychology attempting to place the use of computer simulations in higher education into a theoretical context. In particular, it identifies how computer simulations can be used to enhance the experiential learning opportunities for accounting students 3
who often favour more abstract and theoretical learning style preferences. The manner in which the simulation and spreadsheet models were used is then described. The perceived benefits from this use of computers are then identified, supplemented with quotations taken directly from student experiences. The paper concludes that this use of experiential learning fulfils a number of learning outcomes from computer modelling skills to wider understanding of the financial management of businesses. The exercise involved the students working in groups, which also resulted in additional educational benefits.
Literature Review The importance of experience in educational psychology Educational psychologists have argued that there is no single generally accepted definition of learning (Bugelski, 1979). A variety of schools of psychology have emerged, each united by agreement on a specific approach to the problems of learning. These schools Gestalt psychology, cognitive psychology and humanistic psychology.
Gestaltism takes its name from the German word Gestalt, which means a configuration, structure or pattern. Productive thinking is the development of new structures as the learner attempts to bridge the gap to find a solution to a problem and its component material. “Insight” is said to emerge when the learner suddenly becomes aware of the relevance of their behaviour to some objective and is the result of an unforeseen reorganisation by the leaner in his field of experience. For example, consider learners attempting to find the correct solution to an algebraic problem. They may seize on an apparently important feature of the problem and reformulate it in terms of that feature. Eventually their perception becomes sufficiently structured to allow them to see 4
into the problem and solve it. This Eureka experience, according to Gestaltists, is the result of the student perceiving the structural essence of the total situation posed by the problem.
Whereas there are difficulties with the some of the theoretical aspects, the Gestalt concept of learning has found a sympathetic response in practice. The idea that a student will mentally organise the components of a task and suddenly perceive the solution to a problem is a common occurrence experienced by teachers. In layman’s terms, the penny suddenly drops. As a consequence, the focus of teaching should be on comprehension and understanding, rather than mechanical drill and memorisation.
Cognitive psychology flows from the conceptual framework of Gestalt psychology and is concerned with how organisms gain knowledge about their world. The process of cognition is perceived as the overall functioning of a complex system of unobservable mental abilities, which is the key to the manipulation of information (Bower and Hilgard, 1981). For cognitivists, such as Dewey (1933), learning has to be viewed as part of a whole, as part of an interaction of the learner and their environment. Dewey stressed the importance that curriculum content had to be related to the student’s environment and their intellectual needs rather than the demands of tradition. Classroom activity is not set apart from the progress of society and a curriculum and modes of instruction must be designed consciously with the learner’s purposes and the aims of society in mind. Dewey believed that the true criterion of the value of education is the extent to which it creates a desire for continued “growth” - the readjustments of one’s activity to meet new situations. This could be expressed in modern terms as creating the conditions for “life-long learning”.
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Other cognitivists such as Bruner (1966) argued that students should be taught how to analyse problems, searching for relevance and structure in seeking solutions to questions. Bruner advocated “discovery learning” with students taught the principles of a discipline that give structure to that subject. With this foundation of principles, Bruner argued that the student then has the power to investigate and solve problems within its terms and is more likely to remember information associated with these principles. Bruner explicitly called for intrinsic rewards to be emphasised with instruction arranged so that there is a challenge to the student to exercise his mental powers fully and to heighten their inner sense of accomplishment. The absence of extrinsic rewards means that the student needs continuous knowledge of their progress, i.e. they need effective feedback.
The Humanism school developed in America in the 1960s and rejects much of the work of other educational psychologists, especially the behaviourists. The humanistic psychologist believes that education is the true route to freedom, helping students to achieve “self-actualisation” (Maslow, 1954). In the context of education, motivation for learning may not arise until certain basic needs have been satisfied and this motivation is intrinsic. Intrinsic learning involves learning to be a human being, necessitating the development of wisdom and life skills. The teacher is merely a facilitator, helping the student to experience the real pleasure to be derived from discovery.
An influential humanist, Rogers (1969), advocated student-centred education based on active discovery, rather than passive, conformist accumulation of knowledge, placing emphasis on experiential learning arising from students’ appreciation of what they are learning as satisfying their real needs and wants. For Rogers experiential learning was meaningful and significant and the primary 6
aim of education was learning to learn. He argued that learning takes place more rapidly when a student sees his learning environment as relevant to the achievement of his or her desired objectives, i.e. it is meaningful, and much significant learning is acquired through doing. The exploration of problems that the student is currently experiencing and their solutions as the result of experiential confrontation with practical issues serves to enhance learning.
Experiential learning is defined as a sequence of events that require active involvement by the student at various points (Walter and Marks, 1981). There may be multiple learning objectives, but the central tenet is that the student learns best by active involvement. Experiential learning involves: carrying out an action in a particular instance and seeing the effects of the action; understanding the effects in a particular instance; understanding the general principle under which the particular instance falls; and applying the concept through action in a new circumstance within the range of generalisation (Coleman, 1976).
While the various schools of educational psychology have their inevitable differences as they approach education from contrasting perspectives and scientific backgrounds, there are certain common elements in what they each would define as learning. These are that something happens to the student e.g. an experience, which, as a consequence, leads to change in behaviour (Hintzman, 1978).
A number of researchers in humanistic psychology have attempted to uncover different learning style preferences such as Kolb (1984) who describes a fourstage cycle of learning, see Figure 1
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Figure 1 Kolb’s Learning Loop (Continuous) Concrete Experiences CE
Accommodators
Divergers
Testing implications of concepts in new AE situations
Observation and reflection RO
Convergers
Assimilators AC Formulation of abstract concepts and generalisations
Figure 1 is a figurative representation of experiential learning. While this is an attempt to analyse the learning process, Kolb believes that individuals can be categorised to the extent they favour a learning style, see Figure 2.
Kolb’s work has been tested extensively in the literature and some evidence has been produced to suggest that accountancy students (Baldwin and Reckers, 1984; Baker et al, 1986) and practitioners (Brown and Burke, 1987; Collins and Milliron, 1987) were convergers and those favouring this learning style preference were more successful (Togo and Baldwin, 1990). However, other researchers have argued that the classification process is unreliable and its use should be suspended in accounting education research (Stout and Ruble, 1991a, 1991b, 1994; Geiger et al . 1992, 1993). For a wider debate on these issues see Wilson and Hill (1994).
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Figure 3. Kolb’s Learning Styles Inventory (LSI) Divergers
combine concrete experience and reflective observation, considering specific experience from a number of different perspectives. They are imaginative, interested in people and good at generating ideas.
Assimilators
combine abstract conceptualisation and reflective observation and excel in the development of theoretical frameworks on the basis of that reflection. They are more concerned with the logicality of a theory rather than its practical application.
Convergers
combine abstract conceptualisation and active experimentation in order to test the theory in practice. Such people prefer to deal with things rather than people and respond best to situations where there is one correct answer.
Accommodators
combine concrete experience and active experimentation, using the results of their testing as a basis for new learning. They are comfortable with other people and their strength is in carrying out plans. Adapted from Wilson and Hill (1994)
While there are difficulties with the construct validity of Kolb’s instrumenti, what evidence exists indicates that academically successful accounting students will tend to favour a learning style preference that places less reliance on concrete experience and yet for all schools of educational psychology, this is an essential feature of the learning process. It has been argued that the educational content and method of assessment of accounting degree programmes may favour students with learning style preferences that are more reflective and analytical and this may be a consequence of a lack of concrete learning experiences in the current structure of accounting programmes, (Marriott, 2002). The use of computer technology in accounting education may have a role to play in providing this concrete experience and this may enhance the learning process for students.
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Computer technology in accounting education: spreadsheet models Early evidence would point to the role of the computer as a learning aid of some form. For example, some believed that the underlying philosophy of using computers was to facilitate the learning of basic concepts and accounting techniques while increasing the impact of the learning experience (Pillsbury, 1971). The learning benefits would result from using the computer as a problem-solving tool in accounting education based on the learner’s active involvement, the presence of repetition and the fact that immediate reinforcement is provided (Pillsbury, 1971). These concepts seem to belong in the Neo-behaviourist school. However, in later work the recognition of their universal use in practice led to calls for the incorporation of computers into the curriculum (Ijiri, 1983). The context of Ijiri’s request is cognitivist, arguing that because computers (and spreadsheet models) form part of the learner’s environment they should be taught how to think using them. It could also be thought of as humanist: if students wish to learn about computer spreadsheets because they perceive this skill as enhancing their life-long skills and job opportunities, then educators need to facilitate their use in the classroom.
Bhaskar (1982) indicated the impact computer integration would have using traditional iterative teaching methods. This is contrasted with the modelling approach where the student has to specify the relationships that exist between many accounting variables. This approach to spreadsheet integration and its advantages was described by Helmi, (1986).
“...students are taught to use a spreadsheet package...They use the tool to solve various problems encountered during the course. In each case, they build their own model, enter data, and process. The benefit derived from this alternative is the knowledge developed from using the spreadsheet, a tool that has wide applicability. Besides the knowledge 10
gained from using the spreadsheet, students have to acquire an understanding of the relationships existing in a problem, in order to build the model. This, in turn, helps them in the comprehension of the analytical method used.” Helmi (1986, p 106)
This cognitive endorsement of spreadsheet use is supported by Borthick and Clark (1987): “The claim that computer use promotes analytical and algorthmic thinking stems from the premise that one has to think that way to create computer instructions. e.g., with a programming language or a spreadsheet program, to solve problems involving mathematical relationships among variables. The claim does not necessarily apply in situations which one merely uses computer programs or spreadsheet templates created by others.” Borthick and Clark (1987, p174)
Izard and Reeve (1986) recognised the educational benefits of spreadsheets to be their comprehensive and integrative nature. They reasoned that students constructing a spreadsheet template could obtain a comprehensive perspective to a problem by identifying critical inputs and the thought processes for its solution. This is a Gestaltism perspective with its focus on form and “insight” overtones.
Ijiri (1983) examined the potential of the computer, in education, for handling “algorithmic” methods of learning rather than illustrative methods (the latter being the method normally deployed to teach accounting). The illustrative method demonstrates relationships using examples and relies on the inductive ability of the student to absorb the underlying logic.
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Algorithmic thinking appears to focus on formulation, interpretation and analysis with the computer used to perform calculations. If computers are to be successfully integrated into the accounting curriculum, students must learn algorithmic thinking as well as inductive reasoning. Inductive and deductive reasoning are cognitive abilities.
When placed into their psychological context, of whichever school seems most appropriate, it is clear that the integrative use of spreadsheets as a computational tool serves to focus on higher-level learning skills if used in a modelling environment.
Computer technology in accounting education: business simulations While the evidence of the benefits of using spreadsheet models in accounting education has been studied, the use of computer simulations in this area is relatively under-researched. However, the use of simulations in other educational contexts has been the subject of careful study. For example the Association for Business Simulation and Experiential Learning (ABSEL) celebrated its 25th birthday in 2001 (Faria, 2001) and research studying the effectiveness of business games in strategic management courses predates the formation of ABSEL (Raia 1966, Greenlaw and Wyman 1973, Fritzhe 1974.). Keys (1976) reviewed 13 studies demonstrating that in the majority of cases there was an improvement in final examination performance of students in courses using simulations. Malik and Howard (1996) reported that students have more positive attitudes towards learning from business games than from other teaching approaches and Williams (1987) reports the endorsement of business games from the majority of teachers of business policy. The use of business simulations or games in accounting education is less well reported. One exception has been the use of the board game MonopolyTM in the 12
US by Knechel (1989) and in the UK by Clayton (2001). However, these were manual versions of the games, rather than computerised, although the game is now available for use on a PC possibly enhancing the potential use. There has been evidence of simulations used in accounting related courses e.g. auditing and finance.
The Case Study In the case study the students were asked to use the information from the introductory part of the business simulation to prepare a spreadsheet model used to produce financial forecasts for a business plan. The plan and model are submitted for assessment before the simulation is played, so there is an opportunity for reflection. This part of the exercise involves the abstract conceptualisation favoured by the more common learning style preferences of accounting undergraduates i.e. convergers and assimilators. The spreadsheet model is used in a practical context and is secondary to the primary purpose of the assessment, namely the business plan.
The computer simulation and modelling exercise are introduced after lectures describing the small business sector and the financial problems encounter by small firms e.g. relatively low returns caused by low barriers to entry, severe capital rationing caused by equity/funding gaps, consequent cash flow difficulties especially during expansion, the propensity to fail, etc.
The computer simulation package is relatively unsophisticated, but this is a strength rather than a weakness. The package is called The Entrepreneur and is produced by a small software house, April Training Executive. The simulation takes place in the motor industry and the students, in groups of four, manage their own sports car manufacturing business. Groups of four were used as this 13
enabled peer group interaction, leading to students having to disaggregate the tasks and manage their completion.
It is worth noting that the precise educational use of the software is not exactly as the software developers intended. Rather, the method described is one that has evolved by the researcher over ten years of using the simulation with students in higher education.
The first stage is to select a market segment from a choice of 8 (e.g. luxury, medium, low quality, etc.) and this results in a print out of business variables unique to that group e.g. workers wage rates, cost of renting factory, inflation rates, etc.,. This is another appealing feature of the software. All groups can operate in the same segment, but have different variables to work with, which reduces the scope for plagiarism and increases a competitive spirit between groups.
The groups then approach a bank for financeii. Details of the fictional owner’s assets and outgoings are requested and a letter is produced detailing the interest rates applicable and the facilities available. If all groups are provided with a similar starting position, this encourages further a competitive spirit and engenders a feeling of equity between groups. Care should be taken to provide the group with sufficient capital to start the business without being too generous, e.g. around £500,000 to £m1 in loan and overdraft is enough for most segments. The purpose of the exercise is to simulate small (new) business financial management problems and this is lost if too much cash is available.
It is at this point the groups are instructed to take the information provided and to produce a spreadsheet model of the business to assist in the preparation of a 14
business plan. Accompanying lectures detail the facets of a good business plan and the groups have to rely on their spreadsheet modelling skills developed earlier in their degree course to prepare the financial forecasts required. The groups are instructed to prepare quarterly statements (cash flow forecast, profit and loss accounts and balance sheets; mirroring the output of the simulation) for the first two years. As these students were final year accounting students they were not provided with any lectures on how to prepare the financial statements, just templates detailing the relevant chart of accounts, (although for other courses with non-specialist students the author has used the simulation as a method of teaching the accounting and modelling skills required).
Tutor support is made available on an ad hoc basis during the period of business plan preparation, around two to three weeks. However, this support is not “free” and groups are charged £500 for ten minutes advice. This fee is accumulated and paid as a “dividend” in the first quarter. This is the only method available in the simulation to deprive the business of cash to recompense for a fee, although the software house is amenable to modest changes in the simulation. (The company has made a number of changes to reflect realistic company tax timings and rates as well as technical adjustments to ensure correct accounting for manufacturing concerns.) The reason for this artificial fee is twofold. Firstly, business advice is not free in the real world and small firms are reluctant to seek it. This is also the behaviour of the groups. So despite investing up to £0.5m they are unwilling to spend 0.1% on the advice of an “expert”. Secondly, it prevents groups from constantly learning from the tutor. The aim is for the students to learn together and to interact as a group, not to rely on tutor support.
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The business plan and accompanying financial statements are submitted for assessment and marked against a predetermined set of criteria outlined in the lectures on business planning. At this point, some “free” advice may be given to the group in the assessment feedback, especially if it becomes clear that the group will fail at an early stage due to a misunderstanding, or, more commonly, hopelessly over-ambitious forecasts.
Once groups are familiar with the tutor’s comments on the marked plans the simulation is “played”. This involves two of the groups visiting the tutor who inputs the variables for the first quarter and produces a hard copy of a company internal report and financial statements. On input of these variables, the simulation produces any number of random events that the group have to respond to e.g. do they wish to produce a racing version of their car for competitions? An immediate response is required. This serves a number of purposes. Firstly, by taking the group two at a time, all members of the group must have a firm understanding of the business model, otherwise they may make decisions to the detriment of the business and their group. Secondly, in real life small business managers have to respond quickly to events and quite often decisions are made intuitively. So the students are placed in a situation where they are experiencing what it is like to be a small business owner manager. Print outs of the random events and the decisions taken are produced and the two students return to their group.
Following each round (one quarter) the group discusses the output of the simulation and compares the situation to that of their spreadsheet model. If the model is well prepared they can adapt it to respond to events that have occurred or to changes in the variables that are enforced by the simulated market. For
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example, the price of the product may need to be reduced, new features added, or production halted if few orders have been received.
While this inter group analysis takes place and the group ponders the next set of input variables, the tutor is busy inputting the decisions of another team. Groups are allowed half an hour to make their next move, although experience has shown that later “quarters” can take less time unless the business is facing a crisis. Two groups can take around three hours to “play” the simulation.
Having two or more teams operating the simulation creates a spirit of competition and groups seek to better the performance of one another. For large classes the support of teaching colleagues may be sought so that the whole cohort can undergo the learning experience together. This is not a technical necessity as each simulation is “stand alone” with the computer simulating the market. This is quite realistic as small firms are price takers and cannot manipulate overall demand.
The use of the tutor to input variables is not a necessity as the package is very easy to use. However, when students are left to input the variables themselves they tend to enter “computer game mode”, experimenting with changing multiple variables at each round and fail to monitor their performance against their plan. They usually bankrupt the business in less than one year. The use of the tutor to input variables allows time for reflection and analysis, key aspects of experiential learning. It also enables groups to adapt their spreadsheet model to forecast more accurately the expected financial outcome. For example, they may be able to predict demand if price falls further, etc. During the simulation, they can also ask the tutor for more “paid” advice if required.
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The actual performance of the business is not assessed. This would hardly be fair as there are random events not experienced by every group, but more importantly it would reduce the enjoyment of the experience. Instead, groups are asked to compare the performance of their business against their plan in a form of post-investment appraisal. This analysis involves the preparation of various ratios and graphs and groups are asked to rationalise their decision choices. For example, why did you choose to reduce the price at this point, what alternatives could you have considered? On average, around 20% of teams will become bankrupt. However, these “failing” groups often produce the most considered post investment appraisal trying to understand where they “went wrong” and in the formal assessment their performance may exceed their more “successful” contemporaries.
In using a computer simulation and a spreadsheet model the learner is undergoing a unique blend of experiential learning combined with algorithmic thinking. They are grappling with understanding the whole problem, and they receive reinforcement from comparing the behaviour of their model against the simulated real world of the computer.
Results Learning outcomes: the tutor’s perspective There are a number of potential learning outcomes achieved from this exercise and some are discussed below.
The need for accurate spreadsheet modelling is immediately apparent. Spreadsheets are designed to answer the question “What if?” The wide range of favourable and unfavourable events that can occur demonstrates if inadequate coverage has been given to sensitivity analysis in the initial plan. 18
From participating in the simulation, the need for adequate and timely financial information and the ability to understand and interpret it is also clear. In particular the comparison of actual cash flows with forecasts enables any cash crisis to be pre-empted and corrective action taken.
Students become aware that they need to know their business model in order to respond to unexpected events quickly and take intuitive decisions. This ability comes from rigorous planning. The use of the financial projections in the business plan and subsequent variance analysis ensures that control is maintained, otherwise the new business becomes a hostage to events that occur and the venture deviates from the plan. Despite relatively generous initial capital availability, the need for finance, especially working capital, is made clear. Students learn that a growing small business needs as much finance as possible, but the available sources are limited in the short term. This indicates the problems faced by small firms wishing to grow and why many “stagnate”. Having attempted to run a new business it is clear that most students would “do things differently” if they could start again. Students clearly learn from their mistakes as do entrepreneurs and this can highlight the benefits of “bouncing back” and why small business failure is not necessarily always a negative experience.
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Learning outcomes: The students’ perspectives The students were asked what they learned from the exercise using a two-page reflection of their experiences; 18 students out of 33 participated (55% response rate). These reflections were analysed using Nvivo with an open coding of responses. Nodes were added as new reflections were observed, with assumed names to protect the identity of the students. The reflections are divided into two sections: expected and unexpected. Expected outcomes The first observed result was that as an exercise in business planning it was a success, blending well with the learning outcomes of the module and building on skills developed earlier in the course. “This assignment had given me the opportunity to put theories that I have learned throughout my course into practice. For instance, I practised my financial and management accounting when preparing the financial projections of our business. Before this assignment, we only learned the calculation and the theories of cash flow, profit and loss account, and balance sheet, but in this assignment we learned to do [the financial projections] from the beginning. We also provided the ratio and sensitivity analysis and projected some graphs in our financial analysis. We wanted our business plan to be a working document when we ran the simulation.” Abdul Through carrying out the simulation I think it will actually reinforce want we have actually been taught, because the responses and general actions were so close to what we have learnt over the past few months. So often it is the case that you can learn something and then discover that it does not actually happen in practice. I therefore found it a pleasant change to have evidence that what we covered in this module actually reflects reality (in as much as a computer simulation can.) Mary There was also evidence of Gestaltist and cognitive understanding of the larger business problem, some even using the term “insight” to describe their feelings towards what they had learned. “The business simulation taught me the importance of a good business plan, of clearly thinking through everything what could happen to a company, and how quickly a business changes.”
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Grant “In addition to improvements in accounting techniques, the other group members and myself also gained a great insight into the intricacies of running a small business. Aside from the theory on issues such as the equity gap and marketing which we had acquired during lectures and through reading of the relevant texts, actually running a business really brought these issues to life and enabled a deeper understanding.” Mark During the module, the common problems of the financial management of small firms had been emphasised in a number of lectures; however, it became apparent that the simulation provided the students with concrete experience of the reality of severe capital rationing and the increased tendency for new businesses to fail because of cash flow difficulties. Five of the 18 students specifically referred to the lessons of cash flow management they had encountered. A selection of responses is provided. The business simulation … gave us a good lesson … on the actual conduct of a small business and we learnt about the importance of cash flow as the 'lifeblood' of the small firms. Kulvinder The experience I encountered throughout both the business plan and simulation clearly [demonstrated] that liquidity is vital for a small business to survive and why it [a business plan] is essential. Neo Other examples of “learning by doing” and enhancing technical accounting skills were also found, along with intrinsic rewards of “achievement”, using theoretical skills in a practical context, etc. “Much effort was also put in producing the projected cash flows for the two years of business. This gave me the opportunity to put my accounting skills into practice. I have learned that reliable and accurate figures had to be used so that a loan provider can be convinced to finance a business. The effective management of our money was crucial to maintain the business. I found that the cash flow statement was vital for any decision making, such as, whether to buy an additional bay or taking on new workers on the production line.” Vasant
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“Working on a practical project … helped me a great deal with my accountancy skills. Developing your own business provided an added sense of responsibility and an increased desire for accuracy. There was a real sense of achievement in producing the financial statements for the company. Developing a good understanding of the business improved my technical skills a great deal.” Mark “I found it particularly interesting applying techniques such as sensitivity analysis, which I have been made aware of over the past three years. Up until now these have been taught on a more theoretical basis, with an occasional simplified example to ease understanding. Being able to carry out sensitivity analysis in a “real” situation enabled me to truly see its use as a valuable tool, transforming the business plan into a working document.” Mary One of the main tenets of experiential learning theory is the importance of learning from mistakes and five students specifically mentioned this phrase. Ironically, this had some relevance to entrepreneurial theory where the ability to “bounce back” from failure is a key indicator of future business success. This irony was not lost to all students: Overall I enjoyed every aspect of this simulation even though I found it difficult at times. It has also allowed me to learn from my mistakes which is something a small business proprietor would never be able to do as the stigma attached to failure is hard to shift and it can often happen so quickly that recovery is almost impossible. Griff After the simulation, we [the group] met and discussed the exercise. We analysed what we did wrong and how we used the business plan as a guide for our company. Looking back … I realised that we made some mistakes…. However, I take that as a lesson and reminder for me not to make the same mistakes again. Adbul Unexpected outcomes By far the most commonly reported unplanned benefit came from the students’ experience of working as a group. Accountancy education in universities can provide some opportunities for effective group work, and there are many examples of good practise, however, there are also occasions when the group work is contrived and can be less successful. No fewer than 14 out of the 18
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students (78%) offered specific comments relating to the benefits of working as a group on this exercise. The students recognised group working as relevant to their future working environment (humanist) and, without tutor prompting, developed group working skills such as delegation of tasks, listening, compromise, etc. There were also further self actualisation goals achieved with students reporting an increase in confidence and assertiveness. A small selection of comments is given below. One valuable experience that I gained from this assignment was ‘teamwork’. I believe the experience of working in a group will be very useful in my future career because it teaches me how to work as [part of] a team and how to make the right decision for the business. Because this assignment was about setting up a small business, I felt as if my group members and I were like a group of management team or the owners of the business. We worked with each other and listen to each one’s idea in order to come up with the best plan and control of the business. Abdul [The exercise] recognises the importance of teamwork and identifies why group work plays such an essential part in many aspects of everyday life, from family life, to the classroom, right through to the workplace. . Evan From a personal view I was taught much about working as part of a team. I learnt how to be more assertive when putting across my viewpoint, and as we worked together more I became more confident in contributing ideas. I learnt to evaluate other’s opinions and to reach a compromise. Giles In order to make a successful team requires respect to be had for each member so that you listen to other people’s opinions and in the event of a disagreement, learn to compromise. It is important that compromises are made because if someone feels that their ideas are being disregarded they will eventually stop contributing and the team will become less effective. Nicola I really enjoyed this assignment, it made such a change from anything else I have ever been set. The accounting degree in general has very little in terms of group activities; even the majority of tutorials have relatively little interaction between members. When researching and carrying out an assignment it is very easy to get rooted into one way of thinking, therefore becomes very difficult to look at something from a different point of view. Due to the
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interaction within the group, it ensured that the project was not just looked at from one direction, but had input from a variety of angles. Mary As far as experience of team working is concerned, I feel that the actual computer simulation was the most beneficial. Immediately, the communication problems I felt that we had as a team seemed to disappear. We were all putting forward ideas on how to improve the situation within our company, and all finally listening to what each other had to say. I also felt as if I grew in confidence throughout the simulation. Mary Finally there were a series of comments endorsing the use of the computer simulation and spreadsheet model as an enjoyable and effective learning exercise, even if the students’ recognised that the simulation had some limitations. The simulation part was the fun part of the assignment, but it was also a tough and crucial part. Abdul There is no better way for students in the Management and Finance of Small Business module to get into the action than to put them through the entrepreneur business simulation programme. Tai The business game was professionally designed and I was impressed by events being projected randomly. Vasant It was clear that simplification was necessary for the purpose of this project, and even at its basic level, the exercise was highly illustrative of the workings of a real small business. Mark Conclusions The evidence indicates that all of the anticipated benefits of enhanced concrete experience in an experiential learning context expected from educational theory are present. The students were learning by doing, learning from mistakes, gaining insight from seeing the bigger business problem, receiving intrinsic rewards such as a sense of achievement, increased confidence, etc. The spreadsheet modelling skills, together with the underlying algorithmic thinking necessary to prepare the models, were all present. However, as they were
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applied in a real world environment they were used in context and were secondary to the main business problem. If the modelling problem was provided without the simulation element it would have been another exercise in abstract conceptualisation. This may have suited the learning style preferences of the many of the students, but it would risk losing most of the benefits obtained and made the whole exercise a less enjoyable learning experience.
This paper presents the results of a single case study and, in research terms, there are a number of limitations associated with the research method. As the student observations are from self-selecting, respondents, who were not anonymous to the researcher, there is scope for potential bias. For example, students who did not enjoy the exercise may not have responded. However, the University deploys an independent module evaluation using an anonymous questionnaire completed by students that has a much higher response rate. In this evaluation exercise, the module performed exceptionally well compared to other courses taken by the same students. For legal reasons the results of this exercise cannot be reported publicly, however, it is indicative that the views expressed by the students in this study are not significantly different from the rest of the cohort.
Another limitation relates to the fact that the experiences of groups will differ and cannot be controlled. This limitation is present whenever group work and case study techniques are used and is also common in other examples of problembased learning.
While the limitations of the study cannot be overlooked, and the results must be viewed in the appropriate context, the benefits remain considerable. The main benefit is that the use of the computer simulation and spreadsheet model 25
provides a concrete experience of accounting used in a real world context. It enables students to practise and learn accounting skills and it is possible to use this exercise on earlier years of an accounting degree and with intermediate business studies students. It is also appropriate for postgraduate courses in small business management and MBA electives dealing with these issues.
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i
For a discussion of the robustness of LSI as an instrument please refer to Mainemelis, Boyatzis and Kolb (2002). ii The package also enables the group to select venture capital finance. This is not selected for two reasons. Firstly, it is rare for venture capitalist (VC) to invest in new small business start-ups as the pre-investment analysis is costly and failure rates are high. Therefore the experience is unrealistic. Secondly, from a practical viewpoint the VC in the simulation does not require returns until year 3 and this increases the length of time the simulation has to be operated. This can be boring and in impractical in one semester courses.
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