Given your interest and position in strengthening accounting education, I thought I would share one thought with you. That is, that understanding accounting entries can lead to a greater understanding of accounting.
In Strategic Finance magazine recently there was an article that I found very interesting: See: http://www.imanet.org/PDFs/Public/SF/2010_08/8lawson.pdf
Lehman’s Shell Game: Poor Risk Management By Saurav K. Dutta, CMA; Dennis Caplan, CMA, CPA; and Raef Lawson, CMA, CPA, CFA Lehman’s precipitous fall that began in 2008 ended in bankruptcy. The 2006 strategic shift from a low-risk brokerage model to a high-risk, capital-intensive banking model burdened the company with dangerous illiquid assets, and then the subprime crisis exploded. What followed was a sophisticated implementation of Repo 105 and 108 transactions to cloak the true condition of the company’s worth. The authors analyze the legality and ethics of the accounting practices during the fall.
I e-mailed the authors to compliment them on their article and their judicious use of 4 sets of journal entries that made some of the author's points come to life for me. They all e-mailed me back and said "thanks" plus they were especially glad that I liked the use of journal entries. They had debated whether to include them or not -- knowing that professional articles nowadays generally do not include journal entries. Ultimately they decided to include them anyway because they thought they would prove useful. And, to me they did.
I know that accounting education today neglects journal entries -- for the most part. And, maybe that line of thought should be reconsidered.
Ta ta 4 now! John
John M. Wachowicz, Jr., Ph.D.,
CPA Professor and Regions Bank Scholar
The University of Tennessee
Department of Finance – 438 SMC 916 Volunteer Blvd.
Knoxville, TN 37996-0540