AN EFFECTIVE APPLICATION OF THE ELECTRONIC SPREADSHEET PROGRAM
IN PRINCIPLES OF ACCOUNTING

Computerized practice sets and the like have been available for some time, but a more recent form of
computer application which publishers are introducing with increasing frequency involves the electronic
spreadsheet program. The spreadsheet "templates" (predesigned spreadsheet files stored on a disk)
published with many accounting texts are normally designed to quickly provide solutions to some of the
end-of-chapter problems. The student enters the relevant figures from the problem into the appropriate cells
of the spreadsheet, and the solution is instantly displayed. These applications do serve to acquaint the
student with the spreadsheet program, bul they can often be criticized for their failure to adequately teach
the underlying procedures which were applied to obtain the solution. ‘This article describes a spreadsheet
exercise created at Highland Community College which clarifies and complements course material while also
introducing, students to the spreadsheet program's operation.

Budgeting has traditionally been a difficult area for both instructor and student, and it is here that the
electronic spreadsheet can be used as a very effective teaching aid. The master budget is composed of a
sales budget, inventory purchases (or production) budget, selling expense budget, general and
administrative expense budget, cash budget, and capital expenditures budget, and together they determine
the balances reported on the projected income statement and balance sheet for the budget period. The
interrelationships between these component budgets are complicated, and the process of tracing through
them to analyze the effects of a change in some budgeted amount is the kind of tedious, demanding work
which students find frustrating and confusing, and which instructors find difficult to present. Consequently,
students often learn the steps required in preparing the component budgets, but fail to understand the
significance of the master budget in planning future operations.

The instructional power of the spreadsheet program lies in its ability to allow students to effortlessly use
the budget to analyze the effects of future contingencies. It is only necessary to go to the appropriate
spreadsheet cell and change the budgeted figure. The computer instantly recalculates the master budget,
eliminating, the "busy work" that otherwise interferes with an understanding of its crucial importance in the
planning, process. Also, because spreadsheet programs were originally developed to facilitate the business
budgeting and planning process and are still most directly associated with this use, their application in the
budgeting section of the class arises as a natural and appropriate extension of course material.

As the exercise has been used at Highland, students first prepare a simple individual cash budget for a
three month time horizon, and in the process learn how the spreadsheet operates. In the second, more
extensive part of the exercise, students are given a disk on which is stored as a spreadsheet file the master
budget which was developed as an example in the body of their text. The text's budget was used because
students will have already become familiar with it, and because the text can then serve as a reference source
which describes its construction in detail. An accompanying handout presents a realistic situation in which
the company faces several financial constraints. Students, who act as financial analysts employed by the
firm, use the spreadsheet (1) to determine the effects of several possible future events on net income and the
constraint variables and (2) to analyze the effects of possible corrective actions which might be taken if the
events should occur.

This has proved to be a particularly effective application of the spreadsheet program, generating very
favorable responses from students. Many comment that it is both "fun" and enlightening to see how
accounting information is used in planning, and that they have developed an appreciation of the importance
of accounting in business management.

Craig, Pence
Highland Community College

For further information, contact the author at Highland Community College, Pearl City Road, Freeport, IL

61032-9341.

 

Suanne D. Roueche, Editor
November 21, 1986, Vol Vil, No. 28

INNOVATION ABSTRACTS Is a publication of the National Institute for Staff and Organizational Development, EDB 348, The University of
Texas at Austin, Austin, Texas 78712, (512)471-7545. Subscriptions are available to nonconsortium members for $35 per year. Funding in
part by the W. K. Kellogg Foundation and Sid W,, Richardson Foundation. Issued weekly when classes are in session during fall and spring
terms and once during the summer.

' The University of Texas at Austin, 1986
Further duplication Is permitted only by MEMBER institutions for their own personnel. ISSN 0199-106X