Integrating Business Cycles and Transaction Processing: The Kayak Roll Case

Recent AACSB (2022a, 2022b) mandates for coverage of technology, updates to the CPA exam (AICPA, 2022), and feedback from employers (Nickell & Chambers, 2022; Weisenfeld et al., 2020; Winstead & Wenger, 2015) make clear that accounting information systems (AIS) courses continue to be a core part of the accounting curriculum. AIS textbooks typically include business processes, transaction cycles, transaction processing, database design, and technology use (Raschke & Schatzel, 2021; Richardson et al., 2024; Romney et al., 2024; Turner et al., 2022). However, students can only understand relationships among those topics if the course makes explicit their connections. This paper describes a case that provides linking activities across those topics. Lawson et al. (2014) note that integrating accounting competencies is critical to students’ long-term success.

In this case, students use the information provided to set up a retailer (The Kayak Roll) in QuickBooks, enter beginning balances, enter transactions, create source documents, and generate reports. Students gain hands-on experience processing transactions while learning how the retailer's specific business activities drive the transactions. The case appears in  Appendix A.

Most small and medium-sized businesses in various industries use QuickBooks (Adams, 2022; Enlyft, 2022; Sandberg, 2023). Accounting programs that place graduates in these companies (or the accounting firms that serve them) often teach QuickBooks software in their AIS courses. In my AIS course, I review the primary business cycles (revenue, expenditure, payroll, production, and financing) and relate them to how accountants and accounting systems record transactions in journals and classify them in ledgers. I then explain how QuickBooks, a widely used accounting software package, works. I use the case as a final step toward integrating business cycle and transaction processing concepts into a specific software implementation.

Few existing resources comprehensively integrate business cycles and transaction processing with accounting software. Most AIS textbooks do not include suitably comprehensive cases. Few ancillary hands-on cases integrate business cycle and transaction processing concepts, especially in computerized accounting system settings. Although some published cases feature multiple business cycles (examples include Borthick et al., 2010; Hayes & Reynolds, 2005; Klamm & Weidenmier, 2004; Premuroso et al., 2011; and Walters, 2011), most illustrate a single cycle only (see Lambert and Bee 2015 for a case featuring the production cycle).

Arens and Ward (2020) cover documentation and transaction processing for multiple cycles in a manual accounting system in their activity, which requires 15-20 hours of student work. This time requirement can make the Arens and Ward (2020) activity too time-consuming for many AIS courses, and students must purchase the materials. Other accounting practice sets are manual (such as Kieso et al., 2019) or require software other than QuickBooks (such as Ingraham & Jenkins, 2019).

Instructional handbooks for QuickBooks include Conlon (2021) and Williams (2021) for the QuickBooks desktop and Hartley (2022), Owen (2023), and Yacht and Lowenkron (2023) for QuickBooks online. Although these provide step-by-step guidance for using the software, they do not establish clear connections to business process or cycle concepts.

Long and Long (2019) is the only QuickBooks practice set I found that provides integrated coverage of business cycle and transaction processing activities. However, it requires students to purchase the materials.

The case helps students learn how an automated transaction processing system (QuickBooks) records and summarizes data about business processes. The three learning outcomes students can achieve by working the case include the abilities to:

1. Describe a retail store's business processes, including how they are organized into cycles, and explain how to create information useful to the store's managers using data from those processes.

2. Explain how QuickBook's transaction processing activities relate to specific business process elements.

3. Record data about business processes in the QuickBooks’ transaction processing environment.

Before working this case, students should have exposure to business processes organized as cycles (revenue/collection cycle, purchase/expenditure cycle, or payroll cycle, for example), an understanding of the accounting process (recording transactions and other economic events in a journal, posting journal entries to a ledger, creating a trial balance, preparing and posting adjusting journal entries, creating an adjusted trial balance, preparing and posting closing entries, creating a post-closing trial balance, and preparing financial statements) in a manual system. They should also know the elements and functionality of QuickBooks software. The Intuit for Education (2024) program lets students and faculty obtain QuickBooks software at no cost.

In my use of the case, students read about each business cycle before class. In class, we discuss each cycle before students do related QuickBooks tutorials, which allows students to see how the business cycle processes lead to transaction recording with the software. The readings, lectures, and class discussions include business process concepts and specific steps within the processes, the source documents associated with each process step, typical risks and controls, and how these controls exist (or can be implemented) in QuickBooks.

Instructors can provide conceptual content (business cycles, process steps, risks, controls, and so on) through in-person lectures or narrated videos. This flexibility allows instructors to use the case in courses delivered in any modality (in-person, fully only, or hybrid). Using class time for hands-on practice with the software, preferably right after students learn the specific business process steps, allows immediate reinforcement.

The first two steps in QuickBooks are always “Create a Company” and “Establish Opening Balances.” After that, instructors can cover business cycle concepts in any order. Table 1 shows the linkages between business cycles, process steps, and tasks students perform in QuickBooks as they work the case.

In the teaching notes, I provide a course schedule that shows how to integrate the case into an AIS course using a widely adopted textbook (Romney et al., 2024). I recommend having students submit three separate deliverables as they complete the case, as follows: 1) demonstrate that they have set up the company in QuickBooks with the provided opening balances, 2) describe their treatment of each provided transaction (based on QuickBooks functionality), and 3) reports generated by QuickBooks after they have entered all provided transactions. Grading rubrics and further implementation discussion is in the teaching notes.

The case requires eight to nine hours to complete; however, much of the business cycle/process content will likely replace similar content in most AIS courses. If the course already includes transaction processing software content, the QuickBooks content in the case might replace it, too. Thus, the net additional time needed for the case will likely be less than six hours. As noted above, the case allows multiple delivery configurations, including completing parts or the entirety of the case outside of class.

Instructors can have students record the case transactions manually or in Excel if they lack experience in making accounting entries. My experience with requiring students to enter the same transactions more than once (for example, in a manual system, then in QuickBooks) is that they find it tedious and frustrating.

Whether instructors assign the first task (setting up the company in QuickBooks) in or outside class, I recommend having students submit that work for grading before they do the transaction analysis and data entry work. If a student's beginning balances, account types, or financial statement settings are incorrect, the final submission will be incorrect even if all subsequent work (transaction analysis and entry) is correct.

In my experience teaching QuickBooks, students often need help writing correct summary journal entries (to establish revenue and expense accounts). Their previous experience with closing entries often confuses them about the purpose of summary journal entries in QuickBooks, and their failure to remember specific accounts’ normal balances often leads them to make incorrect (often backward) journal entries.

To reduce the likelihood of cheating, instructors can give each student a unique transaction set (retaining the form of the transactions but changing the numbers. I provide an Excel template with instructions for using this approach in the teaching notes.

I have used this case in 14 introductory undergraduate AIS course sections at three institutions over ten years. The average section size was 19 students. Students were 46% male and 54% female, mostly accounting majors in their junior or senior years, and almost all were traditional college-aged students who had completed prerequisites, including cost accounting and intermediate accounting II.

To gauge how well students felt the case worked, I distributed surveys to students in five sections that asked seven questions about their learning experiences using the case. Each survey item asked students to indicate their agreement with a statement by providing a rating on a seven-point Likert scale (7 = “strongly agree,” 1 = “strongly disagree”). Results appear in Table 2.

These results show that students largely found the case interesting, beneficial, and challenging (statements 1, 6, and 7) and to meet its learning objectives (statements 2, 3, 4, and 5).

I report the distribution of grades students earned on the case assignment in five sections of my AIS course that ran between Fall 2018 and Spring 2020. I taught those sections using the three-submission format I recommended earlier in this paper. Table 3 shows grades over these five sections on each submission and the total grades for the case.

Overall, about 76% of students across semesters achieved a passing grade (C or above) on the case. This student performance demonstrates that most students completing the case master business cycle and process concepts in a QuickBooks transaction processing environment.

This case integrates student learning about business cycles and processes into transaction processing activities. In the case, students apply business cycle/process concepts as they analyze business events and transactions before entering them into QuickBooks transaction-processing software. This integration provides a better understanding of how those concepts are interrelated and applied in a real-world setting. In addition to describing the case, I outline implementation options in an introductory undergraduate AIS course and include efficacy data for using the case in multiple sections of AIS courses.

I appreciate the helpful suggestions and other feedback from the anonymous reviewers as well as the assistance of the senior and associate editors in improving this manuscript. I also express gratitude to the countless students at the University of Wyoming, Colorado Mesa University, and Colorado State University – Pueblo who completed the case and who provided direct and indirect feedback that led to its improvement.

The Kayak Roll, a retail store that sells kayaks, opened 25 months ago. Today, sales are increasing rapidly. The store's general manager, Robert Rogers, is developing sales projections for the next year and wants to use the new accounting software, QuickBooks, to help. He'd like the purchasing manager, Paul Peacock, to manage the store's inventory so it will be sufficient to meet expected demand in the upcoming busy kayak sales season this Spring and Summer. The Kayak Roll's accountant, Andrea Anderson, has been on sick leave for the past three weeks, and Robert has realized that he needs some accounting help to pull the necessary numbers together.

Robert met you, an accounting student at the local university, while volunteering with you on a community project last Fall. Impressed with your work on the project and your accounting acumen, he has invited you to take an internship at The Kayak Roll. He is sure you can help him while Andrea is away and expects you to continue working with Andrea when she returns.

Today, March 1, is your first day at The Kayak Roll. Since Andrea has been on sick leave most of the month, Robert has recorded transactions in an Excel file. Thus, your immediate tasks include setting up the company in QuickBooks, entering beginning account balances, and entering all the February transactions. The information you will need to do this (a chart of accounts, beginning account balances, and information about the company, its customers, vendors, employees, inventory, fixed assets, and bank) is in Tables A.1-A.7 and also available in an Excel file that your instructor will provide. The Kayak Roll's internally generated income statement for January and balance sheet as of January 31 appear in Figures A1 and A2, respectively.

• Task 1: Set up the company with opening balances in QuickBooks

• Task 2: Describe the treatment of transactions based on QuickBooks functionality outside of the platform

• Task 3: Enter transaction data in QuickBooks and prepare reports

1. Read the provided narrative and information about The Kayak Roll

2. Create a QuickBooks company file for The Kayak Roll using the information provided.

3. Use the chart of accounts, financial statement balances, and information provided about equipment, customers, vendors, items, employees, and so on to establish accounts in QuickBooks and enter beginning balances. As you perform this step, note the following:

   • You must categorize each account correctly in the chart of accounts, and account numbers should match those in the narrative. For each control account with subaccounts, code the subaccounts as control#.1, control#.2 Delete any unneeded accounts and edit as necessary to match the chart of accounts provided.

   • When you complete Part 1, your financial statements should match those in the narrative. If they do not, you have done something wrong.

   • You will use most, but not all, information to complete this task.

4. Print and submit the following documents and reports:

   • Chart of Accounts showing only “Account” and “Account Type” (the “Account” column should automatically provide the account number)

   • Balance Sheet at 1/31/23

   • Profit and Loss Report for 1/1/23 – 1/31/23

   • Trial Balance at 1/31/23

   • Customer Balance Summary at 1/31/23

   • Vendor Balance Summary at 1/31/23

   • Inventory Valuation Summary at 1/31/23

As you complete the QuickBooks tutorials, you will learn how to record various types of transactions. Thinking about, understanding, and describing where and how to record each transaction will help you enter transactions during the next (third) task. Analyze each transaction on the transaction list, then describe its proper treatment and note relevant characteristics, including:

1. Name the module(s) in which to record the transaction

2. State the number of source documents you will complete

3. Indicate whether a discount or refund is a part of the transaction

4. Identify adjusting entries as such

5. When an entry is required, or bills must be paid, name the accounts involved.

You may organize your submission using the format shown in Figure A3.

After having thought carefully about how to record each transaction properly, enter February's transactions into your Kayak Roll QuickBooks file (corrected if necessary). The points you earn for this task will depend on the accuracy of the 15 deliverables listed below. Please print and submit the following documents in this order:

1. The document(s) created associated with the Keep Em’ Safe purchase on February 9, 2023

2. The document(s) created associated with the sale to Geraldine Goode on February 10, 2023

3. The document(s) created associated with Geraldine Goode's return on February 12, 2023

4. The check to Jack's Kayaks R’ Us on February 12, 2023

5. The document(s) created associated with the special order to Brad Baker on February 16 and 17, 2023

6. The document(s) created associated with Candy Cane's payment on February 19, 2023

7. The document(s) created associated with the Iceberg Palace purchase on February 23, 2023

8. The check to Paul Peacock on February 28, 2023 with details

9. Adjusted Trial Balance Worksheet (As of February 28, 2023)

10. Balance Sheet (As of February 28, 2023)

11. Profit and Loss Statement (January through February 2023)

12. Profit and Loss Statement (just February 2023)

13. Customer Balance Summary (As of February 28, 2023)

14. Vendor Balance Summary (As of February 28, 2023)

15. Bank Reconciliation (For the period ending February 28, 2023)