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Improving On-Farm Accounting Records through an Innovative Approach to Teaching Accounting

Bradley Hilty

Summary

The importance of sound financial records in managing a business is common knowledge among educators and consultants. Results of a recent research project at Penn State University indicate that accounting records of profitable dairies are significantly better than those of unprofitable dairies. Additionally, owners of profitable farms spend more time managing their business than owners of unprofitable farms. Considerable efforts have been devoted to teaching farmers how to keep better records, including programs on the use of popular accounting software. Despite these efforts, numerous mistakes are still made, because individuals responsible for maintaining accounting records lack an understanding of proper accounting principles and practices. Through the development of an innovative approach to teaching accounting, participants have illustrated a significant improvement in their knowledge of proper accounting principles and their ability to implement proper accounting practices in their daily accounting efforts. Participants are taught how to keep their accounting systems in balance by using: 1) an expanded version of the basic accounting equation, “Assets = Liabilities + Equity”, which illustrates how income and expenses impact the equation through the integral relationship of the balance sheet and income statement; and 2) a system of up and down arrows to illustrate which factors in the equation must change to keep the system in balance during typical transactions. Over 250 people have completed the course. Pre and post-test scores indicate significant increases in participants’ knowledge levels. Follow up surveys indicate that participants feel the course has improved the quality of their accounting records.

Details

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