The Jay Company Case: A New Learning Aid To The Accounting Information System

Abstract

Accounting is frequently called the language of business.  To understand this language requires a working knowledge of the accounting equation, accounting rules, and accounting information flows.  Business students must understand the nature of financial transactions, the impact of these transactions on the financial statements, and the relationships among the financial statements.  In this paper, we describe the Jay Company – a case tool that we have developed and used in teaching the structure of the accounting information system.  The Jay Company case is based on twenty transactions that occur over a three-year period.  By investing only a relatively brief amount of time, students can employ modern technology to better understand several important concepts.  These include the nature of the accounting information system, the nature of interrelationships among the four major financial statements, the difference between accrual-basis accounting and cash-basis accounting, the different between the direct and indirect methods of presenting the statement of cash flows, and the concept of lifetime income.  The case emphasizes the impact of transactions on financial statements, and de-emphasizes such mundane manual processes as posting and closing.  By focusing on a limited number of transactions, the case guides students away from their natural tendency to get lost in the details of these types of problems.  Students can complete the Jay Company case in about three hours.