Teaching Financial Accounting The Monopoly Way

1. Teaching Financial AccountingThe Monopoly Way by Dr. Archana Raheja Ph.D. – Banking and Finance

2. Financial Accounting • Why Financial Accounting? • Everybody needs a fundamental understanding of financial accounting principles and must have a basic understanding of the language their Accountant speaks. • Financial Accounting Peculiarities • Financial accounting education is excessively procedure and knowledge-oriented. • An Accounting Beginner feels intimidated by financial accounting and feels it must be too difficult to understand.

3. Objectives • Demonstrate how the web-based board game of Monopoly can be used to: • Explain financial accounting transactions • Prepare financial statements • Apply budgeting skills by predicting cash inflows and outflows • Demonstrate how to actively engage an Adult Learner, not only to learn accounting, but to provide the know-how to transfer their learning to the real world's complex financial decisions.

4. Teaching Through A GameEngages The Learner

5. A game… • Motivates a learner to participate to a greater degree than he would in a lecture or discussion class. • Increases the ability of the learner to recall factual knowledge and improve problem-solving skills. • Enables the learner to experience greater attitudinal change than those engaged in more traditional learning environments. • Offers the potential for the learner to attribute greater value to accounting information in the decision-making process. • Gives the learner, through the "wheeling and dealing", intensive practice. • Requires flexibility in thinking as the learner adapts to a dynamic environment. • Benefits the learners with varying skills and experience because participants can play at their own level.

6. Why Monopoly? • Most learners have prior knowledge and experience playing the game of Monopoly. • Monopoly imitates some part of reality, yet is a contest. • Motivating a learner to learn accounting often involves more than book learning. • The intimidating subject can be introduced in an entertaining manner that would be fairly easy to grasp. • Getting students engaged in Monopoly goes a long way to entertaining them, while intentionally reinforcing academics. • The game attempts to build upon a learner’s math and critical thinking skills, reflect upon their life skills, and introduce accounting. • The best financial accounting learning takes place when students make their own decisions after analyzing and evaluating unique situations. The game gives this opportunity to the learner.

7. Resources Required • The web based board game MONOPOLY. • Samples of • Income and Expenditure Statement • Cash Flow Statement • Balance Sheet

8. Procedure • Incorporate Monopoly basics to create a simulation game to teach accounting. • The Monopoly board symbolizes the environment in which the business operates. Working in the accounting environment during the game gives the learner an opportunity to apply accrual accounting. • The Learner is assigned to the game so that there are four tokens per game each token representing an year. • The Learner plays the game of Monopoly, utilizing an financial accounting tool to determine if they have made money or lost money. • The Learner prepares financial statements at regular intervals during the game. • Since the purpose of the game is to drive everyone else into bankruptcy, the financial statements would pretty much look the same. • The Learner plays 13 turns (one year or accounting period) of Monopoly, writing down everything that happens to them during the game. • The Learner plays against two to three computer players.

9. Monopoly – Year 1 • Each yearthe Learner is allocated an imaginary $100 per game for investment. • The Learner must wager on whom they think will eventually win each game. • The Learner predicts his expenses as he travels the board. • For each trip around the board, the Learner determines the total amount of inflows and outflows, and calculate a bottom line figure. • All inflows and outflows are documented in the appropriate categories on the profit and loss statement. • At the conclusion of the first year, the Learner prepares a set of financial statements for their token, with adjusting entries for income tax (a percentage of net income), interest, depreciation on houses and hotels, and accrued salary for progress around the board. • The financial statements are submitted for grading, and the expert assumes the role of a public auditor. • After grading the first year financial statements, the expert transcribes them into a spreadsheet and uploads it to the course Web page.

10. Monopoly - Year 2 • After the expert collects each student's investments or bets, the class is instructed to play a second year of Monopoly and submit financial statements. • After grading the financial statement for all tokens in each game, the expert publishes them again on the course Web page. • In a typical game, about two-thirds of the properties have been acquired by the end of the first year, but there are no monopolies. The investment patterns show wide-spread diversification. If a token is perceived to have a slight advantage based on total property acquired, then an average investment or wager will be $30-35. Those tokens perceived to be behind will have averaged $15-20 of investment support. • Feedback from earlier assignments could be incorporated by a student into new assignments.

11. Monopoly - Year 3 • Next, students play a third year of Monopoly, submit financial statements and engage in another round of betting with an additional $100 per game. • In a typical game, most of the properties have been acquired, and some monopolies have been created as a result of trades. Average investments or bets range from about $50 for tokens with the greatest perceived advantage in properties and houses, to $10 for tokens with the least future earnings capabilities. • There are two patterns of game results reflected in the financials. In some games, there are two or three competing tokens with monopolies, and investments in houses and hotels. Financial distress in the losing companies is very evident. In other games, all tokens are still very close. In the games with two or three leading companies' tokens, amounts run an average of $40 to $90. In the games with equal earning tokens, amounts average about $25.

12. Monopoly - Year 4 • The fourth and final year of Monopoly is played, and students submit financial statements for grading. • A winner for each game is declared based on a highest retained earnings. • The wagers for each year are tallied and winnings are presented to each student that invested on the winning token. • Students then must view and analyze the four sets of financial statements for each game.

13. What do the students learn? • Students learn to evaluate income statements for the quality of reported earnings. • They base their estimates of investment value on the chance of future success instead of documented past success. • If certain teams are slow to capitalize on early advantages, investors turn from them in later bidding rounds. • Students get to repeat the end of period accounting cycle, and hopefully, correct any errors that may have occurred during their first attempt.

14. Monopoly can also be used in …. • A review of Intermediate Accounting or to supplement an introductory course. • MBA classes where students can analyze the effects of transactions through use of a detailed balance sheet equation.

15. “Engage-The-Learner”The Grand Finale Achieve the “A-ha” Effect Where the Learner says – “A-ha…ha, NOW I GOT IT”