Accounting Education 13 (Supplement 1), 55 – 70 (December 2004)
Using computerized business simulations and
spreadsheet models in accounting education:
a case study
NEIL MARRIOTT
University of Glamorgan, UK
Received: September 2003
Revised: October 2003
Accepted: December 2004
Abstract
When teaching accounting to undergraduate students, tutors face a number of challenges. There is
the challenge of ‘instrumentality’ as students are motivated to study accounting not because of
some inherent love, or proven ability, for the subject, but for vocational reasons linked to future
extrinsic reward (Ottewill, The challenge of insturmentality in business education, paper presented
at the University of Glamorgan, 23 September 2002). Further challenges, possibly linked to
instrumentality, are in the approaches to learning adopted by some students where surface learning
is favoured to deep learning. Finally, students of accounting at university often lack concrete
experience to enhance their learning, possibly causing them to adopt learning style preferences
favouring abstract conceptualization. Students adopting such learning style preferences can often
perform well in methods of assessment favouring theoretical aspects of accounting. Indeed, there
is evidence that many accounting tutors lack concrete experience, further endorsing the status quo.
This paper outlines the use of a computer simulation in an attempt to combat some of the
challenges faced by accounting educators by providing an opportunity for concrete experience in
an educational setting. It argues that the use of such a simulation is more in keeping with learning
theories developed in educational psychology in general and experiential learning in particular. It
presents an opportunity for students to develop algorithmic thinking, to use spreadsheet-modelling
skills in a realistic setting, to enhance cognition in understanding the ‘whole’ of a business
problem, and to reduce instrumentality through the intrinsic enjoyment of problem-based learning.
Keywords: computerized business simulations, spreadsheet modelling, experiential learning
Introduction
This paper describes the use of a computerized business simulation and student prepared spreadsheet models in an undergraduate accounting course at a traditional UK university. The course
was a final year option for accounting specialists entitled The Management and Finance of Small
Businesses, but many of the lessons learned are applicable to a wide range of courses taught by
accounting educators.
When teaching accounting to undergraduate students, tutors face a number of challenges.
There is the challenge of ‘instrumentality’ as students are motivated to study accounting not
Address for correspondence: Professor Neil Marriott, Glamorgan Business School, University of Glamorgan,
Pontypridd, Wales CF37 1DL, UK. E-mail: [email protected]
Accounting Education
ISSN 0963-9284 print/ISSN 1468-4489 online # 2004 Taylor & Francis Ltd
http://www.tandf.co.uk/journals
DOI: 10.1080/0963928042000310797
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Marriott
because of some inherent love, or proven ability, for the subject, but for vocational reasons
linked to future extrinsic reward (Ottewill, 2002). Further challenges, possibly linked to
instrumentality, are in the approaches to learning adopted by some students where surface learning is favoured to deep learning (Newstead, 1992). Early research suggested that different
courses encouraged different approaches. For example, deep approaches seemed to be more
prevalent in arts courses while reproducing orientations seemed to be more associated with
science and engineering courses (Ramsden and Entwistle, 1981). However, more recent research
suggests that these differences in learning orientations are present in students before they even
start their studies in higher education (Jacobs and Newstead, 2000).
The paper commences with a brief discussion of educational psychology attempting to place the
use of computer simulations in higher education into a theoretical context. In particular, it
identifies how computer simulations can be used to enhance the experiential learning opportunities for accounting students who often favour more abstract and theoretical learning style
preferences. The manner in which the simulation and spreadsheet models were used is then
described. The perceived benefits from this use of computers are then identified, supplemented
with quotations taken directly from student experiences. The paper concludes that this use of
experiential learning fulfils a number of learning outcomes from computer modelling skills to
wider understanding of the financial management of businesses. The exercise involved the
students working in groups, which also resulted in additional educational benefits. Moreover,
the use of computerized business simulations and spreadsheet models responds directly to some
of the challenges facing accounting educators today, reducing instrumentality and surface learning
through the introduction of an enjoyable, challenging and rewarding learning experience.
Literature review
The importance of experience in learning: the differing schools of education psychology
Educational psychologists have argued that there is no single generally accepted definition of
learning (Bugelski, 1979). A variety of schools of psychology have emerged, each united by
agreement on a specific approach to the problems of learning. These schools include Gestalt
psychology, cognitive psychology and humanistic psychology.
Gestaltism takes its name from the German word Gestalt, which means a configuration,
structure or pattern. Productive thinking is the development of new structures as the learner
attempts to bridge the gap to find a solution to a problem and its component material.
‘Insight’ is said to emerge when the learner suddenly becomes aware of the relevance of his/
her behaviour to some objective and is the result of an unforeseen reorganization by the
learner in his/her field of experience. For example, consider learners attempting to find the
correct solution to an algebraic problem. They may seize on an apparently important
feature of the problem and reformulate it in terms of that feature. Eventually their perceptions
become sufficiently structured to allow them to see into the problem and solve it. This
Eureka experience, according to Gestaltists, is the result of the student perceiving the structural
essence of the total situation posed by the problem.
Whereas there are difficulties with some of the theoretical aspects, the Gestalt concept of
learning has found a sympathetic response in practice. The idea that a student will mentally
organize the components of a task and suddenly perceive the solution to a problem is a
common occurrence experienced by teachers. In layman’s terms, the penny suddenly drops.
As a consequence, the focus of teaching should be on comprehension and understanding,
rather than on mechanical drill and memorization.
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Cognitive psychology flows from the conceptual framework of Gestalt psychology and is
concerned with how organisms gain knowledge about their world. The process of cognition is perceived as the overall functioning of a complex system of unobservable mental abilities, which is the
key to the manipulation of information (Bower and Hilgard, 1981). For cognitivists, such as Dewey
(1933), learning has to be viewed as part of a whole, as part of an interaction of the learner and his/
her environment. Dewey stressed the importance of curriculum content being related to the student’s environment and his/her intellectual needs rather than to the demands of tradition. Classroom activity is not set apart from the progress of society and a curriculum and modes of
instruction must be designed consciously with the learner’s purposes and the aims of society in
mind. Dewey believed that the true criterion of the value of education is the extent to which it
creates a desire for continued ‘growth’ – the readjustments of one’s activity to meet new situations.
This could be expressed in modern terms as creating the conditions for ‘life-long learning’.
Other cognitivists such as Bruner (1966) argued that students should be taught how to analyse
problems, searching for relevance and structure in seeking solutions to questions. Bruner
advocated ‘discovery learning’ with students being taught the principles of a discipline which
give structure to that subject. With this foundation of principles, Bruner argued that the
student then has the power to investigate and solve problems within its terms and is more
likely to remember information associated with these principles. Bruner explicitly called for
intrinsic rewards to be emphasized with instruction arranged so that there is a challenge to
the student to exercise his/her mental powers fully and to heighten his/her inner sense of accomplishment. The absence of extrinsic rewards means that the students need continuous knowledge
of their progress, (i.e. they need effective feedback).
The Humanism school developed in America in the 1960s and rejects much of the work of
other educational psychologists. The humanistic psychologist believes that education is the
true route to freedom, helping students to achieve ‘self-actualization’ (Maslow, 1954). In
the context of education, motivation for learning may not arise until certain basic needs have
been satisfied and this motivation is intrinsic. Intrinsic learning involves learning to be a
human being, necessitating the development of wisdom and life skills. The teacher is merely
a facilitator, helping the student to experience the real pleasure to be derived from discovery.
An influential humanist, Rogers (1969), advocated student-centred education based on active
discovery, rather than on the passive, conformist accumulation of knowledge, placing emphasis
on experiential learning arising from students’ appreciation of what they are learning as satisfying their real needs and wants. For Rogers experiential learning was meaningful and significant
and the primary aim of education was learning to learn. He argued that learning takes place more
rapidly when a student sees his learning environment as being relevant to the achievement of his
or her desired objectives (i.e. it is meaningful) and much significant learning is acquired through
doing. The exploration of problems that the student is currently experiencing and their solutions
as the result of experiential confrontation with practical issues serves to enhance learning.
Experiential learning is defined as a sequence of events that require active involvement by
the student at various points (Walter and Marks, 1981). There may be multiple learning objectives, but the central tenet is that the student learns best by active involvement. Experiential
learning involves: carrying out an action in a particular instance and seeing the effects of the
action; understanding the effects in a particular instance; understanding the general principle
under which the particular instance falls; and applying the concept through action in a new
circumstance within the range of generalization (Coleman, 1976).
While the various schools of educational psychology have their inevitable differences as they
approach education from contrasting perspectives and scientific backgrounds, there are certain
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Fig. 1. Kolb’s learning loop (continuous).
common elements in what they each would define as learning. These are that something
happens to the student (e.g. an experience) which, as a consequence. leads to change in behaviour (Hintzman, 1978).
A number of researchers in humanistic psychology have attempted to uncover different
learning style preferences such as Kolb (1984) who describes a four-stage cycle of learning
(see Figure 1). Figure 1 is a figurative representation of experiential learning. While this is an
attempt to analyse the learning process, Kolb believes that individuals can be categorized to
the extent they favour a particular learning style, see Figure 2.
Kolb’s work has been tested extensively in the literature and some evidence has been produced
to suggest that accounting students (Baldwin and Reckers, 1984; Baker et al., 1986) and practitioners (Brown and Burke, 1987; Collins and Milliron, 1987) were convergers and those favouring this learning style preference were more successful (Togo and Baldwin, 1990). However, other
researchers have argued that the classification process is unreliable and its use should be suspended
in accounting education research (Stout and Ruble, 1991a, 1991b, 1994; Geiger et al., 1992, 1993).
For a wider debate on these issues see Wilson and Hill (1994).1
While there are difficulties with the construct validity of Kolb’s instrument,2 that evidence which exists, (Marriott, 2002; Marriott and Marriott, 2003) indicates that academically
1
This is a fertile research area that is increasing constantly. Alice and David Kolb prepare a revised bibliography
of experiential learning research twice a year, (visit http:www.learningfromexperience.com), the most up to date
list contains 1728 entries.
2
For a discussion of the robustness of LSI as an instrument please refer to Mainemelis et al. (2002).
Business simulations and spreadsheet models
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Fig. 2. Kolb’s Learning Styles Inventory (LSI): adapted from Wilson and Hill (1994).
successful accounting students will tend to favour a learning style preference that places less
reliance on concrete experience and yet, for all schools of educational psychology, this is an
essential feature of the learning process.
It has been argued that the educational content and method of assessment of accounting
degree programmes may favour students with learning style preferences that are more reflective
and analytical and this may be a consequence of a lack of concrete learning experiences in the
current structure of accounting programmes (Marriott, 2002). The use of computer technology in
accounting education may have a role to play in providing this concrete experience and this may
enhance the learning process for students.
Computer technology in accounting education: spreadsheet models
Early evidence would point to the role of the computer as a learning aid of some form. For
example, some believed that the underlying philosophy of using computers was to facilitate
the learning of basic concepts and accounting techniques while increasing the impact of the
learning experience (Pillsbury, 1971). The learning benefits would result from using the computer as a problem-solving tool in accounting education based on the learner’s active involvement,
the presence of repetition and the fact that immediate reinforcement is provided (Pillsbury,
1971). However, in later work the recognition of their universal use in practice led to calls
for the incorporation of computers into the curriculum (Ijiri, 1983). The context of Ijiri’s
request is cognitivist, arguing that because computers (and spreadsheet models) form part of
the learner’s environment he/she should be taught how to think using them. It could also be
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thought of as humanist: if students wish to learn about computer spreadsheets because they perceive this skill as enhancing their life-long skills and job opportunities, then educators need to
facilitate their use in the classroom.
Bhaskar (1982) indicated the impact which computer integration would have using traditional
iterative teaching methods. This is contrasted with the modelling approach where the student has
to specify the relationships that exist between many accounting variables. This approach to
spreadsheet integration and its advantages was described by Helmi (1986, p. 106) as follows:
. . . students are taught to use a spreadsheet package . . . They use the tool to solve various problems
encountered during the course. In each case, they build their own model, enter data, and process.
The benefit derived from this alternative is the knowledge developed from using the spreadsheet, a
tool that has wide applicability. Besides the knowledge gained from using the spreadsheet, students
have to acquire an understanding of the relationships existing in a problem, in order to build the
model. This, in turn, helps them in the comprehension of the analytical method used.
This cognitive endorsement of spreadsheet use is supported by Borthick and Clark (1987, p. 174):
The claim that computer use promotes analytical and algorthmic thinking stems from the premise
that one has to think that way to create computer instructions. e.g., with a programming language
or a spreadsheet program, to solve problems involving mathematical relationships among variables.
The claim does not necessarily apply in situations which one merely uses computer programs or
spreadsheet templates created by others.
Izard and Reeve (1986) recognized the educational benefits of spreadsheets to be their
comprehensive and integrative nature. They reasoned that students constructing a spreadsheet
template could obtain a comprehensive perspective to a problem by identifying critical inputs
and the thought processes for its solution. This is a Gestaltism perspective with its focus on
form and ‘insight’ overtones.
Ijiri (1983) examined the potential of the computer, in education, for handling ‘algorithmic’
methods of learning rather than illustrative methods (the latter being the method normally
deployed to teach accounting). The illustrative method demonstrates relationships using
examples and relies on the inductive ability of the student to absorb the underlying logic. Algorithmic thinking appears to focus on formulation, interpretation and analysis with the computer
being used to perform calculations. If computers are to be successfully integrated into the
accounting curriculum, students must learn algorithmic thinking as well as inductive reasoning.
Inductive and deductive reasoning are cognitive abilities.
When placed into their psychological context, of whichever school seems most appropriate, it
is clear that the integrative use of spreadsheets as a computational tool serves to focus on higherlevel learning skills if used in a modelling environment.
Computer technology in accounting education: business simulations
While the evidence of the benefits of using spreadsheet models in accounting education has been
studied, the use of computer simulations in this area is relatively under-researched. However, the
use of simulations in other educational contexts has been the subject of careful study. For
example, the Association for Business Simulation and Experiential Learning (ABSEL) celebrated its 25th birthday in 2001 (Faria, 2001) and research studying the effectiveness of business
games in strategic management courses predates the formation of ABSEL (Raia, 1966;
Greenlaw and Wyman, 1973; Fritzhe, 1974). Keys (1976) reviewed 13 studies demonstrating
that, in the majority of cases, there was an improvement in the final examination performance
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of students in courses using simulations. Malik and Howard (1996) reported that students have
more positive attitudes towards learning from business games than from other teaching
approaches and Williams (1987) reports the endorsement of business games from the majority
of teachers of business policy.
The use of business simulations or games in accounting education is less well reported. One
exception has been the use of the board game MonopolyTM in the USA by Knechel (1989) and
in the UK by Clayton (2001). However, these were manual versions of the games, rather than
computerized versions, although the game is now available for use on a PC possibly enhancing
its potential use.
There has been evidence of simulations used successfully in accounting-related courses such
as auditing (Henry and Crawford, 1998) and finance (Helliar et al., 2000).
The case study
In the case study the students were asked to use the information from the introductory part of the
business simulation to prepare a spreadsheet model used to produce financial forecasts for a
business plan. The plan and model are submitted for assessment before the simulation is
played, so there is an opportunity for reflection. This part of the exercise involves the abstract
conceptualization favoured by the more common learning style preferences of accounting undergraduates (i.e. convergers and assimilators). The spreadsheet model is used in a practical context
and is secondary to the primary purpose of the assessment, namely the business plan.
The computer simulation and modelling exercise are introduced after lectures describing
the small business sector and the financial problems encounter by small firms (e.g. relatively
low returns caused by low barriers to entry, severe capital rationing caused by equity/funding
gaps, consequent cash flow difficulties especially during expansion, the propensity to fail, etc.).
The computer simulation package is relatively unsophisticated, but this is a strength rather
than a weakness. The package is called The Entrepreneur and is produced by a small software
house, April Training Executive. The simulation takes place in the motor industry and the students, in groups of four, manage their own sports car manufacturing business. Groups of four
were used as this enabled peer group interaction, leading to students having to disaggregate
the tasks and manage their completion. It is worth noting that this precise educational use of
the software is not exactly as the software developers intended. Rather, the method described
is one that has evolved by the researcher over ten years of using the simulation with students
in higher education.
The first stage is to select a market segment from a choice of eight (e.g. luxury, medium,
low quality, etc.) and this results in a print-out of business variables unique to that group (e.g.
workers wage rates, cost of renting factory, inflation rates, etc.). This is another appealing
feature of the software. All groups can operate in the same segment, but have different variables to work with, which reduces the scope for plagiarism and increases a competitive spirit
between groups. The groups then approach a bank for finance.3 Details of the fictional
3
The package also enables the group to select venture capital finance. This is not selected for two reasons. First, it
is rare for venture capitalist (VC) to invest in new small business start-ups as the pre-investment analysis is costly
and failure rates are high. Therefore the experience is unrealistic. Secondly, from a practical viewpoint, the VC in
the simulation does not require returns until year three and this increases the length of time the simulation has to
be operated. This can be boring and in impractical in one semester courses.
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owner’s assets and outgoings are requested and a letter is produced detailing the interest rates
applicable and the facilities available. If all groups are provided with a similar starting
position, this encourages further a competitive spirit and engenders a feeling of equity
between groups. Care should be taken to provide the group with sufficient capital to start
the business without being too generous, e.g. around £500 000 to £1m in loan and overdraft
is enough for most segments. The purpose of the exercise is to simulate small (new) business
financial management problems and this realism is eroded if too much initial capital is made
available.
It is at this point that the groups are instructed to take the information provided and to produce
a spreadsheet model of the business to assist in the preparation of a business plan. Accompanying lectures detail the facets of a good business plan and the groups have to rely on their spreadsheet modelling skills developed earlier in their degree course to prepare the financial forecasts
required. The groups are instructed to prepare quarterly statements (cash flow forecast, profit and
loss accounts and balance sheets) mirroring the output of the simulation for the first two years.
As these students were final year accounting students they were not provided with any lectures
on how to prepare the financial statements, just a hard copy of the financial statements produced
by the computer simulation so that students could prepare their model appropriately (although
for other courses with non-specialist students the author has used the simulation as a method
of teaching the accounting and modelling skills required). In this way, when the teams were
playing rounds of the simulation, they could compare their forecast performance with the
actual output of the simulation.
Tutor support is made available on an ad hoc basis during the period of business plan preparation, around two to three weeks. However, this support is not ‘free’ and groups are charged
£500 for 10 minutes advice. This fee is accumulated and paid as a ‘dividend’ in the first
quarter. This is the only method available in the simulation to deprive the business of cash
to reflect payment of a fee, although the software house is amenable to modest changes in
the simulation. (The company has made a number of changes to reflect realistic timings for
company tax payments and rates as well as technical adjustments to ensure correct accounting
for manufacturing concerns.) The reason for this artificial fee is twofold. First, business advice
is not free in the real world and small firms are reluctant to seek it. This is also the behaviour
of the groups. So, despite investing up to £0.5m, they are unwilling to spend 0.1% on the
advice of an ‘expert’. Secondly, it prevents groups from constantly learning from the tutor.
The aim is for the students to learn together and to interact as a group, not to rely on tutor
support.
The business plan and accompanying financial statements are submitted for assessment and
marked against a predetermined set of criteria outlined in the lectures on business planning.
At this point, some ‘free’ advice may be given to the group in the assessment feedback,
especially if it becomes clear that the group will fail at an early stage due to a misunderstanding
or, more commonly, hopelessly over-ambitious forecasts.
Once groups are familiar with the tutor’s comments on the marked plans the simulation is run.
This involves two members of the group visiting the tutor who inputs the variables for the first
quarter and produces a hard copy of a company internal report and financial statements. On input
of these variables, the simulation produces any number of random events that the group have to
respond to (e.g. do they wish to produce a racing version of their car for competitions?). An
immediate response is required. This serves a number of purposes. First, by dealing with the
group two members at a time, all members of the group must have a firm understanding
of the business model; otherwise they may make decisions to the detriment of the business
Business simulations and spreadsheet models
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and their group. This helps to prevent ‘free riders’ (a common phenomenon in group learning
activities) as there is adverse peer pressure if an inappropriate decision is made due to lack of
knowledge of the model or the point in the simulation. Secondly, in real life small business managers have to respond quickly to events and quite often decisions are made intuitively. So the
students are placed in a situation where they are experiencing what it is like to be a small
business owner/manager. Hard copies of the random events and the decisions taken are produced
and the two students return to their group.
Following each round (one quarter) the group discusses the output of the simulation and
compares the situation to that of their spreadsheet model. If the model is well prepared they
can adapt it to respond to events that have occurred or to changes in the variables that are
enforced by the simulated market. For example, the price of the product may need to be
reduced, new product features added, or production halted if few orders have been received.
While this inter-group analysis takes place and the group ponders the next set of input variables,
the tutor is busy inputting the decisions of another team. Groups are allowed half an hour to
make their next move, although experience has shown that later ‘quarters’ can take less time
unless the business is facing a crisis. Two groups can take around three hours to ‘play’ the
simulation.
Having two or more teams operating the simulation creates a spirit of competition and groups
seek to better the performance of one another. For large classes the support of teaching colleagues may be sought so that the whole cohort can undergo the learning experience together.
This is not a technical necessity as each exercise is ‘stand alone’ with the computer simulating
the market. This is quite realistic as small firms are typically price takers and cannot manipulate
overall demand.
The use of the tutor to input variables is not a necessity as the package is very easy to use.
However, when students are left to input the variables themselves they tend to enter ‘computer
game mode’, experimenting with changing multiple variables at each round. They fail to
monitor their performance against their plan and usually bankrupt the business in less than
one simulated year. The use of the tutor to input variables allows time for reflection and analysis,
key aspects of experiential learning. It also enables groups to adapt their spreadsheet model to
forecast more accurately the expected financial outcome. For example, they may be able
to predict likely demand if price falls further, etc. During the simulation, they can also ask
the tutor for more ‘paid’ advice if required.
The actual performance of the business is not assessed. This would hardly be fair as there are
random events not experienced by every group but, more importantly, it would reduce the enjoyment of the experience. Instead, groups are asked to compare the performance of their business
against their plan in a form of post-investment appraisal. This analysis involves the preparation
of various ratios and graphs and groups are asked to rationalize their decision choices. For
example, why did you choose to reduce the price at this point, what alternatives could you
have considered? On average, around 20% of teams will become bankrupt. However, these
‘failing’ groups often produce the most considered post-investment appraisal trying to understand where they ‘went wrong’ and, in the formal assessment, their performance may exceed
their more ‘successful’ contemporaries.
In using a computer simulation and a spreadsheet model learners are undergoing a unique
blend of experiential learning combined with an emphasis on algorithmic thinking and less
reliance on inductive reasoning. They are grappling with understanding the whole problem,
and they receive reinforcement from comparing the behaviour of their model against the simulated real world of the computer.
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Results
Learning outcomes: the tutor’s perspective
There are a number of potential learning outcomes achieved from this exercise and some are
discussed below.
(i) The need for accurate spreadsheet modelling is immediately apparent. Spreadsheets
are designed to answer the question ‘What if?’. The wide range of favourable and
unfavourable events that can occur demonstrates whether inadequate coverage has
been given to sensitivity analysis in the initial plan.
(ii) From participating in the simulation, the need for adequate and timely financial
information and the ability to understand and interpret it is also clear. In particular,
the comparison of actual cash flows with forecasts enables any cash crisis to be
pre-empted and corrective action taken.
(iii) Students become aware that they need to know their business model in order to
respond to unexpected events quickly and take intuitive decisions. This ability
comes from rigorous planning.
(iv) The use of the financial projections in the business plan and subsequent
variance analysis helps in ensuring that control is maintained, otherwise the new
business becomes a hostage to events that occur and the venture deviates from
the plan.
(v) Despite relatively generous initial capital availability, the need for finance –
especially working capital – is made clear. Students learn that a growing small
business needs as much finance as possible, but the available sources are limited in
the short-term. This indicates the problems faced by small firms wishing to grow
and why many ‘stagnate’.
Having attempted to run a new business it is clear that most students would ‘do things differently’ if they could start again. Students clearly learn from their mistakes as do entrepreneurs and
this can highlight the benefits of ‘bouncing back’ and why small business failure is not necessarily always a negative experience.
Learning outcomes: the students’ perspectives
The students were asked what they learned from the exercise using a two-page reflection of their
experiences: 18 students out of 33 participated (55% response rate). These reflections were analysed using Nvivo with an open coding of responses. Nodes were added as new reflections were
observed, with assumed names to protect the identities of the students. The reflections are
divided into two sections: expected and unexpected.
(a) Expected outcomes: The first observed result was that, as an exercise in business planning, it was a success, blending well with the learning outcomes of the module and building on
skills developed earlier in the course.
This assignment had given me the opportunity to put theories that I have learned throughout my course
into practice. For instance, I practised my financial and management accounting when preparing the
financial projections of our business. Before this assignment, we only learned the calculation and
the theories of cash flow, profit and loss account, and balance sheet, but in this assignment we
learned to do [the financial projections] from the beginning. We also provided the ratio and sensitivity
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analysis and projected some graphs in our financial analysis. We wanted our business plan to be a
working document when we ran the simulation.
Abdul
Through carrying out the simulation I think it will actually reinforce what we have actually been
taught, because the responses and general actions were so close to what we have learnt over the
past few months. So often it is the case that you can learn something and then discover that it does
not actually happen in practice. I therefore found it a pleasant change to have evidence that what
we covered in this module actually reflects reality (in as much as a computer simulation can).
Mary
There was also evidence of Gestaltist and cognitive understanding of the larger business
problem, some students even using the term ‘insight’ to describe their feelings towards what
they had learned.
The business simulation taught me the importance of a good business plan, of clearly thinking through
everything that could happen to a company, and how quickly a business changes.
Grant
In addition to improvements in accounting techniques, the other group members and myself also
gained a great insight into the intricacies of running a small business. Aside from the theory on
issues such as the equity gap and marketing which we had acquired during lectures and through
reading of the relevant texts, actually running a business really brought these issues to life and
enabled a deeper understanding.
Mark
During the module, the common problems of the financial management of small firms had
been emphasized in a number of lectures. However, it became apparent that the simulation provided the students with concrete experience of the reality of severe capital rationing and the
increased tendency for new businesses to fail because of cash flow difficulties. Five of the 18
students specifically referred to the lessons of cash flow management which they had encountered. A selection of responses is provided.
The business simulation . . . gave us a good lesson . . . on the actual conduct of a small business and we
learnt about the importance of cash flow as the ‘lifeblood’ of the small firms.
Kulvinder
The experience I encountered throughout both the business plan and simulation clearly [demonstrated]
that liquidity is vital for a small business to survive and why it [a business plan] is essential.
Neo
Other examples of ‘learning by doing’ and enhancing technical accounting skills were also
found, along with intrinsic rewards of ‘achievement’, using theoretical skills in a practical
context, etc.
Much effort was also put into producing the projected cash flows for the two years of business. This
gave me the opportunity to put my accounting skills into practice. I have learned that reliable and accurate figures had to be used so that a loan provider can be convinced to finance a business. The effective
management of our money was crucial to maintain the business. I found that the cash flow statement
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was vital for any decision making, such as whether to buy an additional bay or taking on new workers
on the production line.
Vasant
Working on a practical project . . . helped me a great deal with my accountancy skills. Developing your
own business provided an added sense of responsibility and an increased desire for accuracy. There
was a real sense of achievement in producing the financial statements for the company. Developing
a good understanding of the business improved my technical skills a great deal.
Mark
I found it particularly interesting applying techniques such as sensitivity analysis, which I have been
made aware of over the past three years. Up until now these have been taught on a more theoretical
basis, with an occasional simplified example to ease understanding. Being able to carry out sensitivity
analysis in a ‘real’ situation enabled me to truly see its use as a valuable tool, transforming the business
plan into a working document.
Mary
One of the main tenets of experiential learning theory is the importance of learning from
mistakes and five students specifically mentioned this phrase. Ironically, this had some relevance
to entrepreneurial theory where the ability to ‘bounce back’ from failure is a key indicator of
future business success. This irony was not lost on all students:
Overall I enjoyed every aspect of this simulation even though I found it difficult at times. It has also
allowed me to learn from my mistakes which is something a small business proprietor would never
be able to do as the stigma attached to failure is hard to shift and it can often happen so quickly
that recovery is almost impossible.
Griff
After the simulation, we [the group] met and discussed the exercise. We analysed what we did wrong
and how we used the business plan as a guide for our company. Looking back . . . I realized that we
made some mistakes. . . . However, I take that as a lesson and reminder for me not to make the
same mistakes again.
Adbul
(b) Unexpected outcomes: By far the most commonly reported unplanned benefit came from
the students’ experience of working as a group. Accounting education in universities can provide
some opportunities for effective group work, and there are many examples of good practice.
However, there are also occasions when the group work is contrived and can be less successful.
No fewer than 14 out of the 18 students (78%) offered specific comments relating to the benefits
of working as a group on this exercise. The students recognized group working as being relevant
to their future working environment (humanist) and, without tutor prompting, developed group
working skills such as delegation of tasks, listening, compromise, etc. There were also further
self actualization goals achieved with students reporting an increase in confidence and assertiveness. A small selection of comments is given below.
One valuable experience that I gained from this assignment was ‘teamwork’. I believe the experience
of working in a group will be very useful in my future career because it teaches me how to work as
[part of] a team and how to make the right decision for the business. Because this assignment was
Business simulations and spreadsheet models
67
about setting up a small business, I felt as if my group members and I were like a management team or
the owners of the business. We worked with each other and listen to each one’s idea in order to come
up with the best plan and control of the business.
Abdul
From a personal view I was taught much about working as part of a team. I learnt how to be more
assertive when putting across my viewpoint and, as we worked together more, I became more
confident in contributing ideas. I learnt to evaluate other’s opinions and to reach a compromise.
Giles
I really enjoyed this assignment, it made such a change from anything else I have ever been set. The
accounting degree in general has very little in terms of group activities; even the majority of tutorials
have relatively little interaction between members. When researching and carrying out an assignment
it is very easy to get rooted into one way of thinking, therefore, it becomes very difficult to look at
something from a different point of view. Due to the interaction within the group, it ensured that
the project was not just looked at from one direction, but had input from a variety of angles.
Mary
As far as experience of team working is concerned, I feel that the actual computer simulation was the
most beneficial. Immediately, the communication problems I felt that we had as a team seemed to
disappear. We were all putting forward ideas on how to improve the situation within our company,
and all finally listening to what each other had to say. I also felt as if I grew in confidence throughout
the simulation.
Mary
Finally there was a series of comments endorsing the use of the computer simulation and
spreadsheet model as an enjoyable and effective learning exercise, even if the students recognised that the simulation had some limitations.
The simulation part was the fun part of the assignment, but it was also a tough and crucial part.
Abdul
The business game was professionally designed and I was impressed by events being projected
randomly.
Vasant
It was clear that simplification was necessary for the purpose of this project and, even at its basic level,
the exercise was highly illustrative of the workings of a real small business.
Mark
Conclusions
Educational psychologists of differing schools agree that experience is a vital component of
successful learning. Gestaltists have analysed learning as students being able to perceive the
wider situation of a problem. This exercise requires students to deal with numerous business
variables, known and unknown, and to produce a structured model of the business as a complete
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Marriott
entity. It does not require students to deal with parts of a problem. For example, an increase in
price will impact on a number of forecast financial statements, break-even points, sales levels,
etc. The students are not asked to deal with piecemeal problems that do not inter-relate, which
can be the case with some traditional accounting classes. Instead, they have to grapple with the
bigger business problem of starting a new business and enabling it to survive and prosper using
all the skills, knowledge and understanding at their disposal.
Cognivitists will recognize the intrinsic rewards, challenges and sense of achievement
mentioned by the students who have had to come to terms with the unstructured nature of the
exercise. The students also had to develop complex computerized spreadsheet models, relating
directly to the students’ modern learning environment and providing their own structure to
provide solutions.
It is the humanist school with their advocates of student-centred active discovery and meaningful learning that will appreciate the students’ experiential confrontation with practical issues
and active involvement present in this exercise. Students were learning by doing, content to learn
from their mistakes in an unthreatening simulated real world environment.
In contrast, there is no evidence of instrumentality or surface learning approaches being
adopted by the students. The students clearly enjoyed the learning experience, with many providing the same endorsements for the use of the computer simulation and computer spreadsheet
models.
The spreadsheet modelling skills, together with the underlying algorithmic thinking necessary
to prepare the models, were all present. However, as they were applied in a simulated real world
environment they were used in context and were secondary to the main business problem. If the
modelling problem were provided without the simulation element it would have been another
exercise in abstract conceptualization. This may have suited the learning style preferences of
many of the students, but it would jeopardize the benefits obtained and make the whole exercise
a less enjoyable learning experience.
This paper presents the results of a single case study and, in research terms, there are a number
of limitations associated with the research method. As the student observations are from selfselecting respondents, who were not anonymous to the researcher, there is scope for potential
bias. For example, students who did not enjoy the exercise may not have responded.
However, the University deploys an independent module evaluation using an anonymous
questionnaire completed by students which has a much higher response rate. In this evaluation
exercise, the module performed exceptionally well compared to other courses taken by the same
students. For legal reasons the results of this exercise cannot be reported publicly. However, it is
indicative that the views expressed by the students in this study are not significantly different
from the views of the rest of the cohort.
Another limitation relates to the fact that the experiences of groups will differ and cannot be
controlled. This limitation is present whenever group work and case study techniques are used
and is also common in other examples of problem-based learning.
While the limitations of the study cannot be overlooked, and the results must be viewed in
the appropriate context, the benefits remain considerable. The main benefit is that the use of
the computer simulation and spreadsheet model provides a concrete experience of accounting
used in a real world context. It enables students to practise and learn accounting skills.
It would also be possible to use this exercise in earlier years of an accounting degree and
with intermediate business studies students. It is particularly appropriate for vocational
postgraduate courses in small business management and MBA electives dealing with these
issues.
Business simulations and spreadsheet models
69
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