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Teachers of Principles of Accounts often encounter a significant hurdle: students struggling to grasp the essence of source documents and worded problems. This difficulty is particularly concerning because the ability to interpret and analyse such information forms the very bedrock of understanding business transactions and, consequently, the principles of accounting.
In the realm of accounting, financial realities are frequently presented in narrative form, embedded within descriptions of source documents like invoices, receipts, and bank statements.
For example, the seemingly simple statement, “an invoice shows that on July 15, the business sold goods to XYZ Ltd on credit for $500”, is a microcosm of a business event that needs to be dissected to understand its impact on the accounting equation – an increase in accounts receivable and an increase in sales revenue.
When students falter at this initial stage of interpretation, their ability to comprehend subsequent accounting concepts is severely hampered.
The roots of the struggle: Foundational weaknesses hampering comprehension
The reasons behind this struggle are multifaceted, often stemming from foundational weaknesses that precede their entry into the accounting classroom. One primary cause is a lack of proficiency in reading comprehension and problem-solving. The ability to extract key information from written text and apply logical reasoning is crucial for deciphering worded problems.
These skills are often honed through exposure to and practise with mathematical word problems throughout a student’s earlier education. If students haven’t developed a strong foundation in these areas, the narrative nature of accounting scenarios presents a significant obstacle.
They may struggle to identify the crucial details, understand the relationships between different elements of a transaction, and subsequently apply the relevant accounting principles. This can often be traced back to earlier years where a solid grounding in basic literacy and mathematical reasoning might not have been fully established.
Furthermore, a significant barrier lies in students’ lack of familiarity with basic business terminology. Accounting teachers frequently use terms like “receipts”, “bills”, “invoices”, “bank statements”, “exchange”, “buy”, “sell”, “stock”, “borrow”, “lend”, and “return”, often assuming a common understanding.
However, for many students, these words may lack a concrete business context. Imagine the difficulty a student faces when trying to understand a credit purchase if they don’t clearly differentiate between “buy” and “borrow” or grasp the significance of an “invoice”. This deficiency in basic business vocabulary acts as an immediate impediment to comprehending fundamental accounting concepts.
Adding to this challenge is the issue of not understanding synonyms in a business context. The English language, while rich, can be confusing when dealing with technical subjects. In accounting, the interchangeable use of terms like “buy” and “purchase”, or “inventory” and “stock”, can be a source of significant confusion for students with a limited vocabulary.
While these substitutions might seem natural to instructors, students who haven’t developed an awareness of these semantic equivalents may fail to recognise that different words can describe the same underlying business activity. This can lead to a breakdown in understanding even seemingly simple transactions when presented with slightly different wording.
Finally, many students enter accounting classes without having grasped fundamental mathematical and everyday concepts. Basic accounting is inherently quantitative, requiring an understanding of operations, interest, rates, fractions, percentages, profit and loss, loans, discounts, and hire purchase.
Moreover, a grasp of basic consumer arithmetic, such as calculating household expenses or understanding discounts, provides a real-world context for many accounting principles.
Students lacking these foundational mathematical and financial literacy skills will inevitably struggle with the numerical and conceptual aspects embedded within source documents and worded problems. They may not be able to extract the relevant numerical data or understand the implications of calculations described in the narrative.
Beyond these core issues, another contributing factor can be a lack of exposure to real-world business scenarios. Some students may have limited practical experience or understanding of how businesses operate, making it harder to visualise the transactions described in source documents and worded problems. This lack of context can make the scenarios feel abstract and difficult to relate to.
Empowering understanding: Suggestions for accounting teachers
To effectively assist students who struggle with source documents and worded problems, accounting teachers can adopt the following strategies:
1. Explicitly teach business vocabulary and concepts
Don’t assume prior knowledge of even seemingly common business terms. Dedicate specific time to introduce and explain the meaning of terms like “receipt”, “invoice”, “credit”, “debtor”, and “creditor” within a business context. Use real-world examples and visual aids to illustrate their meaning and significance.
2. Highlight synonyms and related terminology
Actively point out and explain synonyms commonly used in accounting. For example, when introducing “purchase”, explicitly mention that it means the same as “buy” in a business context. Create vocabulary lists and exercises that help students build their business lexicon and recognise equivalent terms.
3. Integrate basic math review and application
Recognise that some students may need a refresher on fundamental mathematical concepts. Incorporate brief reviews of fractions, percentages, and basic calculations as they become relevant to accounting topics such as discounts, bad debts and depreciation. Provide examples that directly link these mathematical skills to the interpretation of source documents and worded problems.
4. Break down worded problems systematically
Teach students a structured approach to tackling worded problems. This could involve techniques like identifying the key actors, the nature of the transaction, the amounts involved, and the timing. Encourage them to underline or highlight crucial information within the problem statement.
5. Analyse source documents in detail
Don’t just present source documents; dissect them with your students. Explain the purpose of each document, the information it contains, and how that information translates into accounting data. Use real or simulated invoices, receipts, and bank statements as teaching tools.
6. Visualise transactions
Encourage students to visualise the business transactions described in worded problems and source documents. Ask them to imagine the flow of goods, services, or money between the involved parties. This can help make the abstract concepts more concrete and understandable.
7. Utilise real-world case studies and examples
Connect accounting concepts to real-world business scenarios that students can relate to. Use examples from everyday life or familiar businesses to illustrate how transactions occur and how they are documented.
8. Foster active reading and comprehension strategies
Encourage students to read accounting problems actively, asking questions like “Who is involved?”, “What happened?”, “When did it happen?”, and “What are the financial implications?” Teach them strategies for identifying the main idea and supporting details in a written scenario.
9. Provide ample practice with varied worded problems
Offer a range of practice problems that vary in complexity and wording. Start with simpler scenarios and gradually introduce more complex ones. Provide feedback on their problem-solving approach, not just the final answer.
10. Encourage collaborative problem solving
Facilitate group work where students can discuss and work through worded problems together. This allows them to learn from each other, clarify their understanding, and develop their problem-solving skills collaboratively.
Conclusion
The ability to effectively interpret source documents and worded problems is not merely a preliminary skill in accounting; it is a fundamental competency that underpins all subsequent learning. By recognising the underlying causes of students’ difficulties in this area – including weaknesses in reading comprehension, problem-solving, business vocabulary, and basic math – and by implementing targeted teaching strategies, accounting teachers can empower their students to decode the language of business and build a solid foundation for success in their accounting studies. Addressing these foundational gaps proactively will not only improve students’ understanding of basic accounting principles but also equip them with essential skills for their future academic and professional endeavours.
See also:
What accounting teachers assume students already know (but often don’t)
ALICE: Assets, Liabilities, Income, Capital, Expenses
Master the Accounting Cycle steps: Your guide to tracking business finances like a pro
Accounting Cycle: Complete basic accounting in 7 steps
Goods for resale: Stock, Purchases, Sales, Carriages and Returns
Debit and Credit: Simple view of in and out
Increase and decrease of ALICE accounts
Expenses: Spending that’s direct, indirect, operating and non-operating
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