Journal of Finance and Accountancy Volume 19, March, 2015

Critical thinking skills and teaching accounting: a comparative

study
Forrest Thompson
Albany State University

H. Lee Washington
Albany State University

ABSTRACT

Accounting textbooks are constantly being revised by the many new pronouncements of
the Financial Accounting Standards Board (FASB) and the International Accounting Standards
Board (IASB). FASB issues accounting standards for the United States, while IASB issues
standards for other countries. Accounting is rapidly moving toward a global convergence of
accounting practices. Students are being overwhelmed by the volume of materials in accounting
textbooks. How should educators convey all of this new information to students? To prepare
students for the profession, it is imperative that students are able to learn new concepts using a
consistent framework. Thus, the authors recommends all accounting concepts should be
presented to students using the ABCs of accounting teaching model. “A” is for Allocation, “B”
is for Book Valuation, and “C” is for Classification. This allows students to learn new material
without getting overwhelm with details rules and procedures. Thus students are able to learn
more material and instructors are able to focus on teaching the critical thinking skills that the
marketplace demands. The purpose of this paper is to convey the authors’ use of the ABCs of
teaching accounting model. This paper gives the result of one Historically Black Colleges and
University (HBCU) using the ABCs of accounting teaching model teaching relative to the
HBCU performance on Certified Public Accountant (CPA) exams for the years 2012, 2013 and
2014. The results were mixed and further research is needed.

Keywords: critical thinking skills, ABCs of accounting, HBCU, CPA exam

Copyright statement: Authors retain the copyright to the manuscripts published in AABRI
journals. Please see the AABRI Copyright Policy at [Link]

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Journal of Finance and Accountancy Volume 19, March, 2015

INTRODUCTION

Since 2010, the authors have been on the faculty of a HBCU located in Georgia. The
authors are the only full-time faculty, thus are responsible for teaching all accounting courses.
The failure rate has average thirty-five (35%) percent. Failure is defined as a student receiving a
grade of “D”, “F” or “W” in an accounting course. This failure rate was unacceptable, thus a
search begin to explore ways of reducing this rate without compromising the academic integrity
required to prepare students to become an accountant.
This study explores a new teaching model designed to improve students’ technical
competencies while increasing their critical thinking skills. What adjustments to a classroom
lesson plan and teaching strategy are useful to improve interpersonal communication, creativity,
reasoning and analytical abilities? Does improvements in interpersonal communication,
creativity, reasoning and analytical abilities require abandoning the traditional teaching model?
Critical thinking includes analyzing, conceptualizing, reasoning and evaluating. Research finds
that these skills can be developed in learners if teaching strategies evolve beyond memorization
(Reinstein,2008). Accounting graduates are expected to possess a healthy dose of critical
thinking skills. This study explores a teaching model reflective of cognitive thinking. Cognitive
teaching increases the need to compare, contrast, group, and memorize relevant accounting
concepts. The literature argues that students have considerable difficulty in solving accounting
problems that are slightly different than those presented in the classroom, even though the same
concepts are being covered. The Pathways Commission has called for improvements in
accounting curriculum and teaching techniques (Bloom, 2013). The quality of future accountants
will be shaped by a need for improvement in critical thinking skills. The purpose of this paper is
to convey the authors’ result of using the ABCs of accounting teaching model.

SIGNIFICANCE OF THE PROBLEM

The accounting profession requires more creativity and innovative thinking in order to be
competitive. Much of the literature argues that teaching models that require students to
memorize accounting rules and procedures fail to cultivate critical thinking in problem solving.
The Bedford Committee (1986) asserts that the traditional accounting lectures fail to stimulate
creativity and innovative thinking. Thus student are not educational ready to enter the
profession. The Pathway’s Commission finds that accounting programs are overly invested in
outmoded models. Bloom (2013) finds that students increasingly exhibit difficulty solving
complex accounting problems.
The goal of teaching should always embrace a pedagogy designed to discover a higher
order of thinking. Higher order critical thinking can be achieved if the teaching approach gets it
right. Such is the pursuit of this study. The five step process for developing higher level critical
thinking skills (Limbach, 2008) are:
Step 1 - Learning Objective
Step 2 - Teach through Questioning
Step 3 - Practice before Assessment
Step 4 - Review, Refine and Improve
Step 5 - Provide Feedback and Assessment of Learning.

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Journal of Finance and Accountancy Volume 19, March, 2015

LITERATURE REVIEW

Singer and Wiesner (2013) suggest that high schools teach basic accounting rules and
procedures, thus allowing colleges to focus on critical thinking skills. In their study, the authors
found factors such as homework, peer interaction, and emphasis on science versus humanities
had a strong impact on higher level thinking. A study by Kitaoka (2011), an economics
professor, suggested that teachers using the traditional chalk and talk may not help students to
develop good problem solving skills. Kitaoka suggested alternative methods designed to
increase teacher-student communications along with context rich problem solving. Findings
from this study show an increase in student performance. An increase in communications
motivates a student to actively participate in the learning process.
In 1989, Brigham Young University (BYU) faculty decided that their accounting students
were often required to memorize IRS code sections or FASB pronouncements. Faculty lectures
were primarily based on traditional content competencies. Concept applications were limited to
textbook problems and instructors had little time to focus on the conceptual foundation of
accounting or real world relevance. In 1994, BYU decided to modify the content of its
accounting courses (Albrecht, 1994). Writing skills were stressed in selected classes and more
emphasis was placed on oral communications skills. BYU sought to enhance the skill-based
competencies’ required in the accounting curriculum. The faculty decided to focus on nine
expanded competencies in addition to technical accounting competencies (Albreacht, 1994).
The BYU faculty realized that they were inexperienced in teaching such skills and that
significant development would be necessary. The nine competencies can be grouped into five
categories as follows:
• Written communication
1. Ability to present views in writing
• Oral communication
2. Ability to present views through oral communication
3. Ability to listen effectively
• Group work and people skills
4. Ability to understand group dynamics and work effectively with people
5. Ability to resolve conflict
6. Ability to organize and delegate tasks
• Critical thinking
7. Ability to solve diverse and unstructured problems
8. Ability to read, critique, and judge the value of written work
• Working under pressure
9. Ability to deal effectively with imposed pressure and deadlines.

As the new curriculum was developed, these nine expanded competencies became part of the
focus of each day lesson plan. Each four-hour block emphasized one or more of these
competencies. In addition to the accounting technical competencies, the grading system was
redesigned to weight the technical content and the other competencies equally. The revised
curriculum also incorporated changes to the student evaluation system to close the loop in the
assurance of learning process.

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Journal of Finance and Accountancy Volume 19, March, 2015

Once the competencies were measured, student performances were summarized into a
single course grade. BYU twenty-four (24) semester credit hours of accounting curriculum was
divided into six four-credit hour courses. These courses were scheduled as following:
fall semester
• Accounting Information Systems
• Intermediate Financial Accounting I
• Financial Statement Auditing
spring semester
• Cost and Management Accounting
• Intermediate Financial Accounting II
• Fundamental of Taxation.

The new accounting curriculum at BYU represented a major structural change from their
traditional accounting education ([Link]). In summary, the reactions of the vast majority
of faculty, students, and other stakeholders who studied or participated in this revised curriculum
were positive. Indeed, the benefits seem to far outweigh the costs. In recent years, the National
Association of State Board of Accountancy report on the performance of candidates on the CPA
exam ranked BYU second in the nation with a past rate of 83.4% for 2012, first in 2013 with a
past rate of 84.2% and fifth in 2014 with a pass rate of 84% for large accounting program. These
results are definitive external metrics of the success of BYU accounting program (NASBA).
Some observers have suggested that BYU, a private, religious-based institution has been
able to make these significant curriculum changes because of its unique faculty and student
body. The authors are not convinced that this transformation requires such specific
circumstances. The crucial variable for success does not seem to be a unique demography--but
rather a willingness to change coupled with patient work.

ABCs OF ACCOUNTING

To improve the performance of students and to reduce the failure rate of students at this
HBCU, the authors are using the ABCs of accounting teaching model. This model allows
students to learn new concepts using a consistent framework. This allows students to learn new
material without getting overwhelmed with details rules and procedures. Thus, each new
accounting concept is introduced to students using the ABCs of accounting teaching model
(Thompson, 2013). The meaning of this acronym are:
“A” is for Allocation;
“B” is for Book valuation; and
“C” is for Classification.
The “A” stands for the allocation concept that is used it to explain the relationship
between the balance sheet and the income statement. Thompson (2013) states that “it teaches
students that all items on the balance sheet will be allocated to the income statement at some
future date. For example, inventory and cost of goods sold are the same costs. These costs must
be allocated from the balance sheet to the income statement under the accrual basis of
accounting. Thus first-in, first-out (FIFO) and last-in, first-out (LIFO) are just the mechanics for
completing this allocation process.” This allows students to learn the allocation concept using a
consistent framework. Thus, students are able to learn new materials without getting

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Journal of Finance and Accountancy Volume 19, March, 2015

overwhelmed with details rules and procedures (Thompson, 2013). Instructors are now able to
devote more time to the critical thinking skills that the marketplace demands.
The “B” stands for the book valuation concept that is used it to explain the various
valuation bases used to record transactions. Thompson (2013) states that “accounting textbooks
use terms such as historical cost, amortized cost, present value, discounted cash flows, and fair
value as separate valuation basis. Students are often confused and mislead into thinking that
these are different valuation basis and not just a variation of historical cost or fair value. Once
students understand the book valuation concept, students can easily apply it to other
measurements without further explanation.” This allows students to learn the book valuation
concept using a consistent framework. Thus, students are able to learn new materials without
getting overwhelmed with details rules and procedures (Thompson, 2013). Instructors are now
able to devote more time to the critical thinking skills that the marketplace demands.
The “C” stands for the classification concept that is used to explain that accounting
information become valuable to creditors and owner when it is proper classified. Thompson
(2013) states that “proper classification enhances the decision-making process. It teaches
students to classify accounts into the following categories: asset, liability, equity, revenue (gain),
and expense (loss). Thus, when a new account is introduced in the textbook, students can
immediately classify that account.” This classification scheme can be used to further sub-
classify items on the balance sheet and income statement. Thus, students are able to learn new
materials without getting overwhelmed with details rules and procedures (Thompson, 2013).
Instructors are now able to devote more time to the critical thinking skills that the marketplace
demands.
The acronym continues with the “Big D” for disclosure. To insure users that the financial
statements information is not misleading, students are taught that all significant allocation, book
valuation, and classification issues must be disclosed (Thompson, 2013). For example, it would
be misleading to value inventory at $100,000 without disclosing how this $100,000 was
determined, such as FIFO or LIFO. Thus, our teaching technique has involved over the past five
years. It has evolved from teaching less accounting rules and procedures to more emphasis on
accounting concepts.
This paper also proposes a greater use of digital instructional support platforms to
reinforce conceptual learning through homework assignments while classroom interaction
emphasizes higher order critical thinking while connecting the dots to the concepts assigned.
The increase of student to faculty communication is structured to develop higher ordered
thinking (Newman, 2008). Today’s student embrace of digital technology offers a unique
opportunity to maximize learning concepts while yielding additional time for critical thinking
activities. Digital innovations are still in its infant stage. Accounting will surely benefit from an
increase integration of instructional technology into the classroom (Fichman, 2014).
This paper evaluates the correlation of the ABCs of accounting teaching model to student
performance on CPA exams at a HBCU. This HBCU has some significant challenges as it
relates to student preparedness for college level work and the availability of financial resources.
Just like BYU, this new accounting teaching model represents a major structural change from the
traditional accounting teaching model. Again, some observers might suggest that a HBCU might
have a unique faculty and student body. Again, the authors are not convinced that this is the
case. The crucial variable for success does not seem to be a unique demography--but rather a
willingness to change coupled with patient work.

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Journal of Finance and Accountancy Volume 19, March, 2015

CPA EXAM RESULTS

The ABCs of accounting model involves preparing students for the new technological era
of e-commerce and the attributes that students must have to be successful. Student must have
academic competencies of technical, analytical, conceptual, and communications skills along
with other behavior competencies of professional image, judgment, assertiveness, teamwork, and
leadership to be successful in the marketplace. The goal is to develop these competencies via
higher level critical thinking skills.
The CPA exam is an external metric that can be used to evaluate the effectiveness of the
ABCs of accounting model. This is a uniform exam given on a worldwide basis to identify those
individuals who process the basic competencies to be called a CPA. The CPA exam consists of
the following four sections:
• AUD- -Auditing and Attestation
• BEC- -Business Environment and Concepts
• FAR- -Financial Accounting and Reporting
• REG- -Regulation.

This study seeks to determine a correlation between the ABCs of accounting model and
the performance on the CPA exam for this HBCU, for the years 2012, 2013 and 2014. Some
average baseline demographic information about this HBCU is presented below:
• University enrollment 4,400 students
• College of business 770 students
• Accounting majors 125 students
• Accounting graduates per year 20 students.

The smaller number of accounting majors and accounting graduates allowed the faculty to
give individualized attention to students to enhance their critical thinking skills. This has
resulted in smaller number of students siting for the CPA exam, an external metric to evaluate
the effectiveness of the accounting program at this HBCU. Is this HBCU moving in the right
direction?
SUMMARY PERFORMANCE
Candidate Sections Percent Average
Year Total Total Pass Score__
2012 7 13 53.9% 70.8
2013 14 29 27.6% 57.8
2014 6 10 30.0% 69.6

SECTION PERFORMANCE
Total Events per Section Percent Pass Percent Pass
AUD BEC FAR REC AUD BEC FAR REG
2012 3 0 6 4 66.7% 0.0% 33.3% 75.0%
2013 14 7 3 5 14.3% 28.6% 66.7% 40.0%
2014 3 3 3 1 33.3% 66.7% 0.0% 0.0%

The summary performance shows that the number of HBCU students sitting for the CPA
exam increase from seven (7) in 2012 to fourteen (14) in 2013, a one-hundred percent increase,

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Journal of Finance and Accountancy Volume 19, March, 2015

but decrease by over a one-hundred percent to six (6) in 2014. The total sections taken results
were similar. The section total increase from thirteen (13) to twenty-nine (29) from 2012 to
2013 but decrease to ten (10) in 2014. The percent pass rate decrease by forty-nine percent from
53.9% to 27.6% from 2012 to 2013 but increase to 30% for 2014. The average score also
decrease by eighteen points from 70.8 to 57.8 from 2012 to 2013, but increase to 69.6 for 2014.
The overall summary performance results were a mixture of increases and decreases.
The section performance percent pass rate results were also a mixture of increases and
decreases for this HBCU. For the year 2012 the best performance was on AUD with a percent
pass rate of 66.7 and on REG with a percent pass rate of 75. For the year 2013, all sections had a
percent pass rate with the highest being on FAR with a percent pass rate of 66.7. For the year
2014, the percent pass rate was 33.3 for AUD and 66.7 for BEC. However, the percent pass rate
was 0% for FAR and REG in 2014. The results reflects the dichotomy between quantity and
quality. The goal is to increase the academic quality of HBCU candidates sitting for the CPA
exam. The results are mixed and hopeful that this HBCU is moving in the right direction to
improve the critical thinking skills of its accounting majors that is reflective by their performance
on the CPA exam. As an added benefit, the failure rate has been reduced from thirty-five (35%)
to twenty (20%) percent, again, a step in the right direction.

CONCLUSION

This study explores the ABCs of accounting model that improves critical thinking skills.
Critical thinking increases the need to compare, contrast, group, and memorize relevant
accounting concepts. The literature argues that students have considerable difficulty in solving
problems that are slightly different than those presented in the classroom, even though the same
concepts is being covered . The quality of future accountants will be shaped by a need for
improvement in critical thinking skills.
This study also seeks to determine a correlation between the ABCs of accounting
teaching model and performance on the CPA exam from a HBCU for the years 2012, 2013 and
2014. The summary performance shows that the number of HBCU students sitting for the CPA
exam increase from 2012 to 2013, a one-hundred percent increase, but decrease by over one-
hundred percent in 2014. The total sections taken results were similar. The section total increase
from 2012 to 2013 but decrease in 2014. The percent pass rate decrease from 2012 to 2013 but
increase in 2014. The average score also decrease by eighteen points from 70.8 to 57.8 from
2012 to 2013, but increase to 69.6 for 2014. The overall summary performance results were a
mixture of increases and decreases. More data points are needed to fully evaluate the
effectiveness of the ABCs of accounting teaching model.
There are many studies conducted over the years about learning and teaching techniques.
Instructors have used the conceptual approach for learners to satisfy outcomes measurement over
the centuries. This study espouses the use of the ABCs of accounting teaching model to teach
accounting concepts. Research suggest a review and reengineer of lesson plans to maximize
learning is needed. The question becomes what changes are required in order to improve upon
the ABCs of accounting teaching model. As an instructor enters a classroom with a lesson plan
that is reflective of the accounting curriculum. Then there is an interaction with various
student’s learning style. Research has shown that no single teaching model will optimize student
learning for all students but the ABCs of accounting teaching model is a step in the right
direction.

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