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Chapter 1
Using Data Analytics to Ask and Answer
Accounting Questions

A Look at This Chapter:

In this chapter, we emphasize how computerization and the availability of data is changing
the role of the accountant as information provider. We talk about how the accounting
profession must change to complement the power of computerization and the plethora of data
available. We use Bloom’s Taxonomy to discuss the higher-order skills accountants
increasingly need to develop. We conclude by proposing the AMPS model as a framework
for performing Data Analytics, which is consistent with accountants developing an analytics
mindset. Finally, we explore the type and scope of questions that decision makers ask as the
first component of the AMPS model.

A Look Ahead:
The availability of data for business and accounting is changing the business world. To
address accounting questions, we must know what data is available. Mastering the data is the
second component of the AMPS model. Specifically, in Chapter 2, we introduce the data
sources that you will see in your accounting career—whether it is generated and owned by
the company (like from a financial reporting system or supply chain system) or comes from
outside the company. We discuss how data can inform accounting decision making.
 page 3

Developing an Analytics Mindset

Mateusz_Szymanski/Shutterstock

EY argues that its professionals and its new hires need an analytics mindset.

So, what is an analytics mindset?

An analytics mindset is the ability to:

Ask the right questions.

Extract, transform, and load relevant data.
Apply appropriate data analytic techniques.
Interpret and share the results with stakeholders.

In this text, we will focus on learning appropriate data analytic techniques that can be used to analyze
data, which we formally refer to as the AMPS model. This analytics mindset serves as a way to see how
the Data Analytics process can help you think through the types of questions that can be addressed and
answered with data. As you continue in your college studies, you will increasingly learn other ways of
developing the critical analytics mindset that will serve you throughout your professional career.

Source: The Analytics Mindset, Ernst & Young Foundation: E&Y Academic Resource Center (EYARC),
2017, http://aaahq.org/Education/Webinars/6-7-17-EY-Academic-Resource-Center-An-Overview-of-
Analytics-Mindset-Competencies-and-Case-Offerings (accessed November 17, 2018).

OBJECTIVES
After reading this chapter, you should be able to:

LO 1-1 Explain how computerization and data availability are shaping the accounting profession.
LO 1-2 Using Bloom’s Taxonomy, describe how the accounting profession is adapting to address the
changing world of data availability.
LO 1-3 Describe how the AMPS model explains the steps in the Data Analytics process.
 LAB 1-1 Journal Entries to Trial Balance
LAB 1-2 Depreciation Using Excel Functions
LAB 1-3 Creating a Mortgage Amortization Schedule
LO 1-4 Analyze the tools/skills accountants will need for their profession and to perform data analytics.

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THE EXPLOSION OF DATA AND THE IMPACT ON THE

ACCOUNTING PROFESSION

LO 1-1
Explain how computerization and
data availability are shaping the
accounting profession.

“Data are widely available; what is scarce is the ability to extract wisdom from them.”
Hal Varian (UC Berkeley and Chief Economist, Google)

The amount of data available continues to explode. There are 2.5 quintillion bytes of data
created each day, which continues to accelerate. Over the last two years alone, 90 percent of
the data in the world was generated.1 Exhibit 1.1 shows this surge of data does not show any
signs of slowing down. The increasing amount of data available to the accountant can both
help and hinder the accountant and his/her work. The abundance of data can be helpful in
addressing company questions, problems, and challenges to the extent the accountant can
harness and analyze the available data. However, the increasing amount of data may hinder
the work of the accountant through information overload, where too much information may
not be properly synthesized or interpreted.
 EXHIBIT 1.1
Data Growth Since 2010
Source: IDC Global DataSphere, November 2018, p. 6, https://www.seagate.com/files/www-content/our-
story/trends/files/idc-seagate-dataage-whitepaper.pdf (accessed July 3, 2019).

With so much data available and computers doing much of the basic accounting work,
including data collection, journal entries, posting to the general ledger, and reporting (such as
publishing financial statements), the job of the accountant is continuing to change from that
of data collection and summarization to data analytics. The opening vignette states that EY
expects its accountants to develop an analytics mindset, able to ask the right questions, find
and extract pertinent data that might address the question, analyze the data, and then
communicate the results to decision makers. Accountants are uniquely positioned to do this
type of analytics and serve a critical role in the decision-making process. Indeed, “Analytics
is at the heart of every business decision.”2 In this text, we will work to develop your
analytics mindset and prepare you for the new and evolving role of accountant and
accounting data analyst.

PROGRESS CHECK
1. How does increasing the amount of data available to address accounting questions help and hinder the
accountant’s role?

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BLOOM’S TAXONOMY, CRITICAL THINKING, AND

WHERE ACCOUNTANTS HAVE A COMPETITIVE
ADVANTAGE

LO 1-2
Using Bloom’s Taxonomy,
describe how the accounting
profession is adapting to address
the changing world of data
availability.

We argue that accounting data analytics represents a higher level of critical

thinking and reasoning than was previously required for accountants. We define
critical thinking as a “manner of thinking that employs curiosity, creativity,
skepticism, analytics, and logic”.3

To illustrate, Bloom’s Taxonomy provides a hierarchical view of critical thinking skills.

As shown in Exhibit 1.2, the hierarchical set of skills go from lowest levels of thinking in (1)
remembering, (2) understanding, and (3) applying, to higher levels of thinking in (4)
analyzing, (5) evaluating, and (6) creating.

EXHIBIT 1.2
Bloom’s Taxonomy: Where Machines Excel and Where Accountants Must Play
Based on: Jessica Shabatura, “Using Bloom’s Taxonomy to Write Effective Learning Objectives,” Teaching
Innovation & Pedagogical Support, University of Arkansas website, https://tips.uark.edu/using-blooms-
taxonomy/ (accessed May 20, 2019).

The basic academic accounting classes like “Accounting Principles,” “Introduction to

Financial Accounting,” or “Introduction to Managerial Accounting” primarily addressed the
remember, understand, and apply skills as noted in Bloom’s Taxonomy. Yet these are the
same tasks we argue that machines/computers perform more reliably than do accountants.
As the accounting profession moves to higher-order thinking levels—including
analyzing, evaluating, and creating information most valuable to decision makers—it
generates more value to the organization.4 Indeed, it is these higher critical thinking skills
that we believe will be a place where accountants can take advantage of the explosion of data
that is available for accountants to analyze and harness. In other words, Bloom’s Taxonomy
offers a framework to think about critical thinking skills, which both accounting firms and
companies that employ accountants now expect accountants to have.5
To be clear, accountants need to master all levels of Bloom’s Taxonomy from the lowest
to the most advanced skills. Accountants simply cannot analyze, evaluate, and create if they
have not mastered the basic accounting knowledge and understanding required by the lower-
level skills of remembering, understanding, and applying levels of critical thinking. The
challenge then is to move beyond the basics to develop higher-order thinking skills.
 page 6
So, how do we start to get there? We argue that employing a Data Analytics approach
allows students to have experiential learning, to ask questions, access applicable data, run
appropriate analytics, and then communicate the results to the decision maker (be they an
auditor, an investor, or management). While there are some things you must memorize and
learn, analytics and evaluation seem the best way to address accounting questions and build
critical thinking skills at the same time. We plan to train you to do just that in this text.

PROGRESS CHECK
2. In your intro to managerial accounting class, were the skills taught more remembering, understanding, and
applying or were they more analyzing, evaluating, and creating?
3. How might data analytics address the analyzing, evaluating, and creating skills more than the lower-level
skills of remembering, understanding, and applying?

DATA ANALYTICS AND THE INTRODUCTION TO THE

AMPS MODEL

LO 1-3
Describe how the AMPS model
explains the steps in the Data
Analytics process.

Recall the analytics mindset proposed by EY (from the chapter-opening vignette) that their
accounting professionals will ultimately need. Exhibit 1.3 details the components of the
analytics mindset:

EXHIBIT 1.3
The Analytics Mindset
Source: The Analytics Mindset, Ernst & Young Foundation: E&Y Academic Resource Center (EYARC), 2017,
http://aaahq.org/Education/Webinars/6-7-17-EY-Academic-Resource-Center-An-Overview-of-Analytics-
Mindset-Competencies-and-Case-Offerings (accessed November 17, 2018).

Ask the right questions.

Extract, transform, and load relevant data.
Apply appropriate data analytic techniques.
Interpret and share the results with stakeholders.
 Closely related to the analytics mindset is the use of a framework we propose that
explains the steps involved in the Data Analytics process. We define Data Analytics as the
process of evaluating data with the purpose of drawing conclusions to address all types of
questions (including accounting questions).
We call this framework, the AMPS model, which stands for the following and included
the named chapters in this textbook:
Ask the Question (Chapter 1).
Master the Data (Chapters 2–4).
Perform the Analysis (Chapters 5–9).
Share the Story (Chapter 10).
Note how each component of the analytics mindset corresponds to each component of the
AMPS framework. In each lab of the textbook, we promote the AMPS model to go from
asking the question to communicating the results by sharing the story.

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To give you an idea of how the AMPS framework would work in addressing accounting
questions, consider the following example:

Illustration of AMPS Model

As an example of how the AMPS model might be applied in a Data Analytics setting, imagine a shoe
manufacturing company trying to value its inventory of shoes.

Ask the Question

Which shoes in inventory are obsolete or slow moving? Should their value be reduced?

Master the Data

Access cost of the inventory sold and the inventory on hand for each shoe in inventory.

Perform the Analysis

Calculate the inventory turnover rate:

The lower the inventory turnover, the higher possibility of the item (or shoe in this case) is obsolete.

Share the Story

Report the level of inventory turnover for each item in graph or table to management and decide which
inventory items are slow moving (those with low inventory ratios).
Management might decide to lower the inventory valuation for those items on its balance sheet and/or
discontinue manufacturing that particular shoe altogether.
 In each lab of the textbook, we promote the AMPS model to go all the way from asking
the question to communicating the results by sharing the story.
We first provide background information on each of the components of the AMPS model.

The AMPS Model: Ask the Question

The best way to start developing critical thinking skills is to ask questions, which is also the
first component of the analytics mindset.6 Given that analyzing data helps strengthen critical
thinking skills (and vice versa),7 one should ask carefully constructed questions that can
potentially be solved using data and Data Analytics. Decision makers may ask questions such
as:
Which product is more profitable at stores in Utah?
Is it more profitable to produce an item in the United States or in the Philippines?
How much overhead should we apply to each one of our Android apps that we’ve built?
What is the probability that the company we’re considering for an investment will go
bankrupt or commit financial statement fraud?
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If our variable costs change, how will that affect our breakeven point?
How will our increasing employee health insurance rates affect our level in sales to
breakeven?
Generally, the more succinct the question, the better. For example, it is hard to consider a
question like, “How does Target grow net income?” but easier to potentially address “How
do we sell more snack foods at Target in Fayetteville, Arkansas, store 359?” Narrowing the
scope of the question sets us up better to find the necessary data, perform the analytics and
potentially be able to address the question at hand.
In data analytics, the axiom “Your data won’t speak unless you ask it the right data
analytics questions”8 really refers to the expertise the accountant can offer by asking
questions that are answerable by the data. Given accountants’ knowledge of business
processes, such as how information flows from customer purchase to order fulfilment and
how those transactions affect the income statement or the balance sheet, accountants can help
management create specific questions addressing the problem, opportunity, or challenge at
hand. Because accountants often have a good sense of what data (whether from an internal or
external source) is available to address the question, accountants are in a perfect position to
perform data analytics.
The type of analytics performed commonly depends on these four common types of
questions:
What happened? What is happening?
Why did it happen? What are the root causes of past results?
Will it happen in the future? What is the probability something will happen? Is it
 forecastable?
What should we do, based on what we expect will happen? What should we do based on
what we expect will happen? How do we optimize our performance based on potential
constraints?”
We revisit each of these question types in Chapters 5–9 to match the available data and
appropriate analytics method.
Specific questions from each of these four types might include the following:
Questions like “What happened? What is happening?” (forming the basis of
descriptive analytics). These types of questions include:
a. Did we make a profit last year?
b. Did return on assets improve or decline over the past year?
c. Did the airline company’s on-time departures improve this past month?
d. How much did we pay in federal taxes last year?
e. How long have the existing accounts receivable been past due?
f. Which product is the most profitable one for the company?
Questions like “Why did it happen? What are the root causes of past results?” (forming
the basis of diagnostic analytics). These types of questions include:
a. Why did sales, general, and administrative expenses increase relative to the industry?
b. Why did overall tax increase even though net income did not?
c. How did entry and approval of various transactions violate the segregation of duties?
d. Can our variance analytics help explain why the labor expenses increased over the past
year?
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Questions like “Will it happen in the future? What is the probability something
will happen? Is it forecastable?” (forming the basis of predictive analytics). These types
of questions include:
a. What is the chance the company will go bankrupt?
b. Can we predict whether customers will repay their loan based on customer background
(credit score, employment record, existing debt)?
c. Can the IRS find those individuals or corporations evading taxes using predictive
techniques?
d. Can we predict if or when the financial statements might be misstated?
Questions like “What should we do based on what we expect will happen? How do we
optimize our performance based on potential constraints?” (forming the basis of
prescriptive analytics). These types of questions include:
a. If we have all 12/31 year-end audit clients, how will we organize our audit work in the new
year?
b. How can revenues be maximized (or costs be minimized) if there is a trade war with China?
c. What is the level of sales that will allow us to break even?
d. Should the company rent or lease its headquarters office building?
e. Should the company make its products or outsource to other manufacturers?
Once we know what specific question we are addressing, we can continue to the next step
of acquiring the appropriate data to address the question as completely as possible.

The AMPS Model: Master the Data (Chapters 2–4)

Once the accountant understands the question, he/she starts to consider appropriate data that
could be used. Accountants need to understand the trade-offs between relevant data and
reliable data (such as that data which might exhibit more representational faithfulness). Does
the data exhibit high levels of data integrity, where data is accurate, valid, and consistent
over time? Are the data considered to be facts or just opinions?
Accountants also need to understand the trade-offs between data that is well organized
(like a financial statement or a spreadsheet) or not well organized (like an Instagram post),
data internal or external to the company, and even the potential cost of acquiring and
processing the data as compared to the potential value provided by use of the data.
Accountants need to consider additional traits of the data. For example, is the data
alphanumeric (text)? Is the data categorical [sex (male or female) or blood type (type A, B,
AB or O), etc.], or numerical (1,253)? How will the data be accessed and from what source?
Are there errors in the data or does it contain missing data? Chapters 2, 3, and 4 of this
textbook address potential sources of data and qualities of that data that could be used to
address accounting questions.

The AMPS Model: Perform the Analysis (Chapters 5–9)

There are many possible analyses we can do with the data to help address the question.
Different questions require different types of analyses, including descriptive, diagnostic,
predictive, and prescriptive analytics. A variety of statistical techniques are available to help
perform the different analyses, including the following:
A histogram or a scatterplot might be used to help evaluate journal entries that are
excessively big or excessively small (or negative) with the testing of internal controls.
Regression analytics might be used to evaluate cost behavior by segregating total costs into
fixed and variable cost components.
A PivotTable might be used to summarize the accounts receivable aging or post journal
entries to a trial balance.
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An internal rate of return or net present value analysis might be used to evaluate
capital investments made by the firm or equity investments made by a potential investor.
Benford’s law analytics might be used to find and evaluate unusual and potentially fraudulent
transactions.
What-if/goal seek analytics might be used to perform an analysis of how changing costs and
other factors that affect the breakeven level for a new product.
Part of the task for the accountant is to match the right type of analytics with the right
question. Chapters 5 through 9 of this textbook address the potential descriptive, diagnostic,
predictive, and prescriptive analyses performed with accounting data to help answer the
question.
Sometimes the trade-off will be which tool and statistical technique should be used. In
this text, although we introduce you to data analytics software tools (including UiPath,
Microsoft Access, Idea/ACL, SAS, SAP Lumira, R, and Python), we will focus on the use of
Excel and Tableau (the two most popular programs used in the business world), and even
then, we’ll discuss the trade-off between these two potential tools.
The AMPS Model: Share the Story (Chapter 10)
Once we’ve performed the analytics, it is important to share the story by communicating the
results to decision makers. Another way to communicate would be through the use of
visualizations, where decision makers can view the information represented by a graph,
chart, or other image that might help them more fully grasp content being communicated.
Would it be more effective to have a written report, a graph, a dashboard (a graphical
summary of various measures tracked by a company), or all three to most effectively
communicate information to a specific decision maker? If it is a one-time analytics, the
results might be static and need to be performed just once or even annually (or quarterly) as
new accounting results come out. If the analytics need to be done daily, weekly, or
continuously, perhaps a graph or chart that is more dynamic updating on a continuous basis
might be the most appropriate way to communicate results. Chapter 10 addresses ideas on
how to best “share the story” with decision makers.

The Cyclical, Recursive Nature of the AMPS Model

After completing all components of the AMPS model, the decision maker often is more
knowledgeable and better able to ask deeper, more refined questions, which suggests the
AMPS model should best be viewed as cyclical in nature. Data Analytics might be viewed as
successively peeling the layer of an onion. By peeling the first layer of the onion, page 11
you see the next layer and evaluate it and remove it to get to the third layer, etc.
Often, the AMPS model must be performed multiple times, refining the question (Ask the
Question), considering different types of data (Master the Data), performing additional
analytics (Perform the Analysis) and retelling the story in each iteration (Sharing the Story)
before the issue/problem/challenge can be finally addressed with some confidence as shown
in Exhibit 1.4.
 EXHIBIT 1.4
The Recursive Nature of the Data Analytics Process Using the AMPS Model

PROGRESS CHECK
4. According to the text, which type of statistical technique might be used to find fraudulent transactions?
5. If a company was trying to track its actual daily sales as compared to its sales targets, would you use a
dynamic or static report?

WHAT TOOLS DO ACCOUNTANTS NEED?

LO 1-4
Analyze the tools/skills
accountants will need for their
profession and to perform data
analytics.

As we think about the accountants’ needed data acquisition, data analytics, and data
visualization skills and tools, we can break them down into four main areas as shown in
Exhibit 1.5:

EXHIBIT 1.5
Accountant Tools and Skills
Courtesy of Ryan Teeter.

LAB CONNECTION
 Lab 1-1 provides a good illustration of how PivotTables are used in Excel to organize and summarize data.
There is also additional explanation of PivotTables in Chapter 2.

Spreadsheets. Excel (or other spreadsheet program like Google Sheets) is usually the first
tool for a great deal of analytics that accountants will perform (covered throughout
textbook):
a. Basic formula and functions.
b. References—connect other data in the spreadsheet.
c. Macros—automate processes that are repetitive.
d. PivotTables—often a very functional tool for many types of summarizations; also serves to
help organize the data. We define PivotTables as a tool that allows reorganization and
summarization of certain data using crosstabulations without changing the underlying
spreadsheet (or data).
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Query. Used to access the data needed for analytics (covered in Chapters 3 and 4):
a. VLOOKUP in Excel retrieves data from a table or worksheet.
b. SQL might be used to access specific data from large datasets.
Scripting. Includes programs written to perform analytics to do repetitive tasks (covered in
Chapters 3, 4, and 8; programs written in R or Python are covered in advanced data analytics
courses).
Visualizations. Used to communicate data to decision makers using Tableau, Power BI, or
other tools for communication (covered in Chapter 10).

PROGRESS CHECK
6. Which component of the AMPS model would include visualizations?
7. Which component of the AMPS model would include querying a bigger dataset to extract the data needed
for analysis?

Summary
The landscape where accountants have traditionally operated is changing. It is
important to develop new capabilities (including higher-order thinking), new skills, and
use new tools. Due to computerization and the existence of mounds of data available,
accountants will need to be adept at Data Analytics. In this chapter, we present the
AMPS model as the foundation for the rest of the book and highlight the need to ask
appropriate questions that are potentially answerable via Data Analytics.
Key Words
amortization schedule (30) A schedule (or table) detailing each periodic payment to ultimately pay off a
loan/debt.
AMPS model (6) A framework for performing data analytics, which includes Ask the Question, Master the Data,
Perform the Analysis, and Share the Story.
Bloom’s Taxonomy (5) A hierarchical view of thinking and learning skills.
dashboard (10) A graphical summary of various measures tracked by a company.
Data Analytics (6) The process of evaluating data with the purpose of drawing conclusions to address all types of
questions, including accounting questions.
data integrity (9) The accuracy, validity, and consistency of data used and stored over time.
dynamic (10) Characterized by constant update, change, or activity.
information overload (4) Access or exposure to too much information to be able to process.
PivotTables (11) A tool that allows reorganization and summarization of certain data using crosstabulations
without changing the underlying spreadsheet (or data).
static (10) Characterized by the lack of constant update, change, or activity.
visualization (10) The representation of information as a graph, chart, or other image.

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ANSWERS TO PROGRESS CHECKS

1. The increasing amount of data available to the accountant can both help and hinder the accountant
and his/her work. To the extent that the accountant can harness and analyze the available data via
data analytics or other means, it can be helpful in addressing company questions, problems, and
challenges. However, to the extent that the increasing amount of data leads to information overload,
it would be considered most likely to hinder the work of the accountant.
2. Much of the work in your Intro to Managerial Accounting class was getting to learn and memorize the
new terms and the accounting cycle. While the course is a necessary part of developing expertise in
accounting, it mostly addressed the skills of remembering, understanding, and applying.
3. Data analytics by its very name is more likely to address the higher-order skills of analyzing,
evaluating, and creating. By encapsulating a question that needs addressing and harnessing and
testing data to address that question, accountants and accounting students are developing higher-
order critical thinking skills.
4. A Benford’s law analysis might be helpful in finding potentially fraudulent transactions. Other types of
statistical techniques are frequently used as well to uncover fraud.
5. A dynamic dashboard that is changing at least daily would be needed to track actual daily sales and
compare it to sales targets. This gives management the needed information to meet their goals.
6. Visualizations would be included as part of the Share the Story, the final component of the AMPS
model.
7. Querying a larger dataset to get the specific data needed for analytics would be included as part of
the Master the Data, the second component of the AMPS model.
Multiple Choice Questions
1. (LO 1-2) Which is the lowest level of skills in Bloom’s Taxonomy?
a. Create
b. Remember
c. Apply
d. Analyze
2. (LO 1-2) Which is the highest level of skills in Bloom’s Taxonomy?
a. Create
b. Apply
c. Analyze
d. Understand
3. (LO 1-2) Which is the appropriate ordering of skills in Bloom’s Taxonomy, where the “>” symbol
means higher order skills?
a. Remember > Apply
b. Apply > Analyze
c. Analyze > Evaluate
d. Create > Analyze

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4. (LO 1-3) Which component of the AMPS model most appropriately addresses the axiom, “Your data
won’t speak unless you ask it the right data analytics questions”?
a. Ask the Question
b. Master the Data
c. Perform the Analysis
d. Share the Story
5. (LO 1-3) Which component of the AMPS model most appropriately addresses the question of the
best way to communicate data analytics findings with a decision maker?
a. Ask the Question
b. Master the Data
c. Perform the Analysis
d. Share the Story
6. (LO 1-3) What type of question is predicting whether a company will go bankrupt in the coming two
years?
a. What happened? What is happening?
b. Why did it happen? What are the root causes of past results?
c. Will it happen in the future? What is the probability something will happen? Is it forecastable?
d. What should we do based on what we expect will happen? How do we optimize our performance
based on potential constraints?
7. (LO 1-3) What type of question is choosing to take certain tax deductions based on the way
managers believe tax legislation will change in the near future?
a. What happened? What is happening?
b. Why did it happen? What are the root causes of past results?
c. Will it happen in the future? What is the probability something will happen? Is it forecastable?
d. What should we do based on what we expect will happen? How do we optimize our performance
 based on potential constraints?
8. (LO 1-3) What type of question is finding the detail to more clearly understand why net income is
decreasing when revenues are increasing?
a. What happened? What is happening?
b. Why did it happen? What are the root causes of past results?
c. Will it happen in the future? What is the probability something will happen? Is it forecastable?
d. What should we do based on what we expect will happen? What should we do based on what we
expect will happen? How do we optimize our performance based on potential constraints?
9. (LO 1-3) What type of question is determining how much a company paid for state and federal
income tax?
a. What happened? What is happening?
b. Why did it happen? What are the root causes of past results?
c. Will it happen in the future? What is the probability something will happen? Is it forecastable?
d. What should we do based on what we expect will happen? How do we optimize our performance
based on potential constraints?
10. (LO 1-3) A _____ might be used to evaluate which journal entries are outliers.
a. regression analytics
b. Benford’s law analysis
c. histogram
d. sum function (Excel SUM())

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Discussion Questions
1. (LO 1-1) Why would the computer be better at the skills of remembering, understanding, and
applying than the human accountant? In what areas would you say humans have a competitive
advantage over a computer?
2. (LO 1-2) In your intro to financial accounting class, were the skills (noted in Bloom’s Taxonomy)
taught more remembering, understanding, and applying or were they more analyzing, evaluating,
and creating?
3. (LO 1-3) In the component of Master the Data (as part of the AMPS model), what unique competitive
advantage does the accountant hold over computers or other information providers?
4. (LO 1-3) Which component of the AMPS model would include cleaning and preparing the data for
analysis?
5. (LO 1-3) Why was the recursive nature of the AMPS model compared to peeling an onion? In other
words, can we ever just perform the AMPS model and feel like we’ve answered the
question/issue/problem/challenge facing the company?
6. (LO 1-3) According to the text, which would be a potential type of analysis performed for evaluating
the revenues and earnings performance of the recent quarter?

Brief Exercises
1. (LO 1-1, LO 1-2) Match the data analytics term to its Data Analytics definition:
 Data
Analytics Data Analytics Definition
Term
Bloom’s Access or exposure to too much
Taxonomy information to be able to process.
Data Characterized by constant update,
Analytics change, or activity.
dynamic Characterized by the lack of constant
update, change, or activity.
information The process of evaluating data with the
overload purpose of drawing conclusions to
address all types of questions,
including accounting questions.
static An explanation of hierarchical forms of
thinking and learning skills in
education.
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2. (LO 1-3) Match the components of the AMPS model to Data Analytics tasks.

AMPS Model Component

(i.e, Ask the Question,
Data Analytics Task Master the Data, Perform
the Analysis, Share the
Story)
Dashboard providing
daily sales in the Pacific
Northwest.

Checking the data for

 errors and missing data
items before the data is
analyzed.
Vendor trying to decide
which product it should
sell at Walmart.
Using a histogram to
evaluate whether journal
entries were entered by
an unauthorized
employee.
Deciding the best way to
communicate the data
analysis findings to
management.
3. (LO 1-3) Match the components of the AMPS model to Data Analytics tasks.

AMPS Model Component

(i.e, Ask the Question,
Data Analytics Task Master the Data, Perform
the Analysis, Share the
Story)
Deciding which
question to ask that
might help
management best
assess strategy.
Running a regression
analysis to evaluate
the impact of
 advertising.
Extracting data from
the financial reporting
system and prep for
use in a PivotTable.
Publishing financial
statements store-by-
store.
Analyzing how profits
will change if gasoline
prices go up in the
coming year.

Problems
1. (LO 1-2) Match the components of Bloom’s Taxonomy and report who has the advantage (Human or
Machine) to each accounting task.

Bloom’s Taxonomy
Advantage
Component
in This
Accounting (Remember,
Component
Task Understand, Apply,
(Human or
Analyze, Evaluate,
Machine)
Create)
Judging the
value of
information or
ideas.
Recognizing
and recalling
facts.
 facts.
Combining
parts to make a
new whole.
Applying the
facts, rules,
concepts, and
ideas.
Breaking down
information into
component
parts.
Comprehending
what the facts
mean.
2. (LO 1-3) For each of the questions below, categorize them as one of the following question types:
a. What happened? What is happening?
b. Why did it happen? What are the root causes of past results?
c. Will it happen in the future? What is the probability something will happen? Is it forecastable?
d. What should we do based on what we expect will happen? How do we optimize our performance
based on potential constraints?

Question
Data Analytics Question
Type
How much did we pay in federal taxes last
year?
If we have all 12/31 year-end audit clients,
how will we organize our audit work in the
new year?
Can the IRS find those individuals or
corporations evading taxes using predictive
 techniques?
Did the airline company’s on-time
departures improve this past month?
Can our variance analysis help explain why
the labor expenses increased over the past
year?
page 17
3. (LO 1-3) For each of the questions below, categorize the appropriate statistical technique that should
be used to perform the analysis.
a. Regression analysis
b. Benford’s law
c. What-if/goal seek
d. Histogram
e. PivotTable

Statistical
Data Analytics Question
Technique
Finding the frequency of all transactions,
from the minimum to the maximum.
Looking for potentially fraudulent
transactions.
Minimizing tax payment based on
expected changes in tax legislation.
Segregating total costs into fixed and
variable cost components.
Displaying total accounts receivable
balance by days overdue (aging).
4. (LO 1-3) Which of the following components of the AMPS model would each data analytics question
be?
a. Ask the Question
b. Master the Data
c. Perform the Analysis
d. Share the Story

Stage of the
Data Analytics Question
AMPS Model
Management wants answers on why
certain products are unprofitable.
The data has lots of missing data.
Should we report this with a graph or
in a table?
The analysis was done using a sort
command.
The data comes from last year’s
financial statements.
A dashboard is used to communicate
the results.
Which audit tests were performed on
the data?

page 18
LABS ASSOCIATED WITH CHAPTER 1

LAB 1-1 Journal Entries to Trial Balance

LAB 1-2 Using SLN(), SYD(), and DDB() Functions to Depreciate Fixed Assets
LAB 1-3 Creating a Mortgage Amortization Schedule

The multiple choice assessment questions for each lab are assignable via Connect.
Materials are also available for courses not utilizing Connect via the Instructor’s
Manual.

Lab 1-1 Journal Entries to Trial Balance

Note: Appendix A provides a brief tutorial on Excel basic functions and PivotTables
that may be helpful in completing this lab.

Keywords
financial accounting, PivotTable, calculated fields

Lab Insight
One of the first things we learn in an Introduction to Financial Accounting course is
how to write journal entries, post them to the appropriate ledger account, and
formulate a trial balance to check that the journal entries have been posted
appropriately. In this lab, we use an Excel PivotTable to post journal entries and
form a trial balance as a good orientation of some of the useful tools in Excel. This
is a good first step into beginning data analytics.
Required:

Take the journal entries and create a trial balance.

Ask the Question

Can PivotTables be used to post journal entries and create a trial balance?

Master the Data

AttackID is formed to sell privacy and cybersecurity. AttackID begins business
January 1, 2022, and has 52 journal entries in the first month, which we have now
input into an Excel spreadsheet.
 Data Dictionary (A Description of the Data)
Date: Date of journal entry MM/DD/YYYY
JE#: Number of journal entry from 0 to 51
Account: Account name
Debit: The debit entry of the journal entry
Credit: The credit entry of the journal entry
Entered: Initials of person inputting journal entry. Authorized personnel to input include “VR” and
“MW.”
Approved: Initials of person authorizing journal entry. Authorized personnel to approve include
“AC” and “DH.”

page 19
Perform the Analysis
Open Excel File Lab 1-1 Data.xlsx.
A snippet of the spreadsheet is shown in Exhibit 1.6.

EXHIBIT 1.6

Let’s now use Excel’s PivotTable function to create a trial balance.

Step 1

In menu, select Insert> PivotTable. This dialog box will open, as shown in Exhibit
1.7.

EXHIBIT 1.7

page 20
In the dialog box, select the Table/Range that includes the account titles and all of
the data (debits and credits) (or $A$1:$G$106), and select “New Worksheet,” then
click OK. The empty PivotTable will open up in a new worksheet, ready for Step 2.
Step 2
Drag [Account Name] from FIELD NAME into the Rows and [Debit] and [Credit]
into ΣValues fields in the PivotTable. The ΣValues will usually default to “Count of
Debit” and “Count of Credit.” Click the arrow (or chevron symbol) to select “Value
Field Settings” next to “Count of Debit” and “Count of Credit,” and select
Summarize Values by Select Sum; then click OK as shown in Exhibit 1.8.
 EXHIBIT 1.8

Inputs into PivotTable

Columns:
Rows: [Account Name]
∑Values: [Debit] and [Credit]

Step 3
Once we adjust the value field settings, the PivotTable field box will look like
Exhibit 1.9.
The output and the initial trial balance will look as shown in Exhibit 1.10.
Step 4
This is a great start. However, there is one problem: Cash and Accounts Receivable
have both a debit balance and a credit balance. We want to display these two
accounts with its normal debit balance. Notes Payable also has both a debit balance
and a credit balance. We want to display Notes Payable with its normal credit
balance.
To fix this problem, click inside the PivotTable, and the menu will display
PivotTable Tools. Click on the Analyze tab, and then click on “Fields, Items & Sets”
in the Calculations Group. Then click on “Calculated Field,” input “Net Debit” in
the Name and “=if(Debit>Credit, Debit-Credit)” as the formula, and select “Add” as
shown in Exhibit 1.11. Click “OK”.

page 21
EXHIBIT 1.9
 EXHIBIT 1.10

page 22

EXHIBIT 1.11

These instructions tell Excel to create a variable, Net Debit, if the debits are
greater than the credits. Click inside the PivotTable, and the menu will display
PivotTable Tools. Click on the Analyze tab, and then click on “Fields, Items & Sets”
in the Calculations Group. Then click on “Calculated Field,” and input “Net Credit”
in the Name and “=if(Credit>Debit, Credit-Debit)” as the formula, and select “Add”
as shown in Exhibit 1.12. Click “OK”.

EXHIBIT 1.12

These instructions tell Excel to create a variable, Net Credit, if the credits are
greater than the debits.
Step 5

Going back to the PivotTable, we now select Account Name, Sum of Net Debit, and
Sum of Net Credit as shown in Exhibit 1.13. And we deselect Debit and Credit.
 EXHIBIT 1.13

The result is a new PivotTable, which is nearly identical to the trial balance (as
shown in Exhibit 1.10), except accounts do not have both a debit and credit balance.

page 23
The trial balance is nearly done at this point. Now we have a few remaining steps to
format it correctly.
1. Use your cursor to select the entire area of the PivotTable, then Copy (Control-C) the PivotTable, right click
a blank cell in a different part of the spreadsheet, select Paste Special, and select Values. Select OK.
2. Noting that this PivotTable did not sum the grand total correctly for the trial balance, click on the blank cell
in Grand Total row, Net Debit column. Using the Sum function found on the Formula tab, select Insert
Function, insert “=Sum()”, click OK. Select the range to sum the Net Debit column. Click OK. Then follow
the same process to sum the Net Credit column. Make sure debits = credits.
3. Insert a double bottom border under the totals.
4. Add titles at the top: Trial Balance, Debit, and Credit.
5. Insert a bottom border under the column headings Debits and Credits.
6. Reorder the accounts in balance sheet (Cash, Accounts Receivable, Allowance for Doubtful Accounts,
Prepaid Insurance, Computer Supplies, Supplies, Equipment, Building, Accumulated Depreciation, Notes
Payable, Common Stock) and then income statement order (Service Revenue, Salaries Expense, Travel
Expense, Rent Expense, Repairs Expense, Depreciation Expense, Insurance Expense, Misc. Expense,
Payroll Tax Expense, Supplies Expense, Training Expense, Utilities Expense and Bad Debt Expense). To
reorder the accounts, you can highlight the whole row, right click and select Cut, move to the row where you
would like to insert it, and then select Insert Cut Cells to get the row in the appropriate spot.
7. The next step is to format the top and bottom number in each column with the currency symbol and add a
 1000’s separator.
Format the top and bottom numbers of the column with a $ currency sign as follows. Right click on each
number and Format Cells; on the Number tab, select currency and “0” decimal points. Click OK.
page 24
Format the remaining rows in the debit and credit columns by highlighting the numbers. Right
click, select format cells. Select Number on the Number tab, check Use 1000 separator. Move the arrow to 0
decimal places. Click OK (as shown in Exhibit 1.14).

EXHIBIT 1.14
8. The final step is turn off the zero balances so they don’t show in the trial balance. To do so, click File >
Options > Advanced. Under Display options for this worksheet, remove the checkmark that says, “Show a
zero in cells that have zero value” as shown in Exhibit 1.15. (If you get stuck on this part, you can just delete
the zero balances.) Click OK.
 EXHIBIT 1.15

page 25
Share the Story
Once we have completed the trial balance and it, in fact, balances, we are ready to
publish the balance sheet and the income statement for all interested stakeholders.
Assessment:
1. Take a screenshot of your final trial balance and label it “Lab 1-1 Submission.jpg”.
2. Answer the multiple choice questions in Connect.

Lab 1-1 Alternate

Apply the same steps as Lab 1-1 to the Lab 1-1 Alt Data.xlsx dataset, with a
completed formatted trial balance. Open Excel File Lab 1-1 Alt Data.xlsx.
The only exception is you need to order the trial balance at the end in this way:
Reorder the accounts in balance sheet (Cash, Accounts Receivable, Allowance
for Doubtful Accounts, Prepaid Insurance, Computer Supplies, Supplies,
Equipment, Building, Accumulated Depreciation, Notes Payable, Common Stock)
and then income statement order (Sales Revenue, Salaries Expense, Travel Expense,
Rent Expense, Repairs Expense, Depreciation Expense, Insurance Expense, Misc.
Expense, Payroll Tax Expense, Supplies Expense, Training Expense, Utilities
Expense and Bad Debt Expense, Postage Expense). To reorder the accounts, you can
highlight the whole row, right click and select Cut, move to the row where you
 would like to insert it, and then select Insert Cut Cells to get the row in the
appropriate spot.
Assessment:
1. Take a screenshot of your final trial balance and label it “Lab 1-1 Alt Submission.jpg”.
2. Answer the multiple choice questions in Connect.

page 26

Lab 1-2 Using SLN(), SYD(), and DDB() Functions

to Depreciate Fixed Assets
Keywords
financial accounting, depreciation, fixed assets

Lab Insight
In financial accounting, we learn about different depreciation methods including the
following:
1. How to compute depreciation.
2. Which depreciation methods depreciate more at the beginning vs. the end of the useful life.
In this lab, we will consider all the fixed assets of a company and their
depreciation expense. Because generally accepted accounting principles (GAAP)
allow multiple depreciation methods to be used, we will use depreciation analytics
to compute depreciation for the three most common methods (straight-line, double-
declining balance, and sum-of-the-year’s digits).
Required:
Calculate depreciation expense using straight-line depreciation, double-declining
balance, and sum-of-the-year’s digits depreciation.

Ask the Question

How does depreciation differ by the depreciation method chosen?

Master the Data

Pathway Gardens is a landscaping company. It has various equipment that appears
on its fixed asset schedule included in the spreadsheet Lab 1-2.xlsx. We will
compute the depreciation using three different methods and compare and contrast
them.
Open Excel File Lab 1-2 Data.xlsx.
 Data Dictionary:
Year Placed in Service: YYYY
Useful Life: The expected length of the equipment’s life
Description: Name of fixed asset
Original Cost: The purchase price
Salvage Value: The residual dollar value of the fixed asset at the end of the equipment’s useful
life

The current year is 2022. Pathway Garden’s accounting policy is to take no

depreciation in the year of acquisition, but it will take a full year’s depreciation in
the year of disposal.

Perform the Analysis

Step 1
In cell F3, insert the title “SLN,” which stands for straight-line depreciation.

page 27
In cell G3, insert the title “DDB,” which stands for double-declining depreciation.
In cell H3, insert the title “SYD,” which stands for sum-of-the-year’s digits
depreciation.
Insert a bottom border under cells, F3, G3, and H3 by highlighting cells F3:H3 and
then clicking on bottom border option in the Font menu of the Home tab or selecting
the cells and right clicking Format>Cells>Border>select bottom border. Click OK
(as shown in Exhibit 1.16).

EXHIBIT 1.16

Step 2

In this step, we will compute the depreciation expense for the current year.
Computation of Straight-Line Depreciation
In cell F4, we will calculate the straight-line depreciation for the shovel fixed asset
by specifying the following for the SLN() Excel command:
=SLN(Cost, Salvage, Life) where:
Cost (or Original Cost) is in D4, or $50.
Salvage (or Salvage Value) is in E4 or $10.
Life (or Useful Life) is in B4, or 5 years.
Enter “=SLN(D4,E4,B4)” into F4. It should look like Exhibit 1.17.

EXHIBIT 1.17

Computation of Double-Declining Balance Depreciation

In cell G4, we will calculate the double-declining depreciation for the shovel fixed
asset by specifying the following for the DDB() Excel command:
=DDB(Cost, Salvage, Life, Period) where:
Cost (or Original Cost) is in D4, or $50.
Salvage (or Salvage Value) is in E4 or $10.
Life (or Useful Life) is in B4, or 5 years.
Period (which period to compute depreciation since it differs by year) is
computed as $B$1-A4, or 2022-2019, or 3 years. Recall that Pathway Gardens takes
no depreciation in the year of acquisition but takes a full year’s depreciation in the
year of disposal. This computation is consistent with that.
Enter “=DDB(D4,E4,B4,$B$1-A4)” into G4 as shown in Exhibit 1.18.

page 28

EXHIBIT 1.18

Note that we use an absolute reference, $B$1 for the current year. In Excel, an
absolute cell reference is a cell reference that remains constant even if the reference
is copied or moved to another cell or sheet. We do it here so we can continue to
reference this cell when we copy the formula down for other fixed assets.
Computation of Sum-of-the-Year’s Digits Depreciation

In cell H4, we will calculate the sum-of-the-years digits depreciation for the shovel
fixed asset by specifying the following for the SYD() Excel command:
=SYD(Cost, Salvage, Life, Period) where:
Cost (or Original Cost) is in D4, or $50.
Salvage (or Salvage Value) is in E4 or $10.
Life (or Useful Life) is in B4, or 5 years.
Period (which period to compute depreciation since it differs by year) is computed
as $B$1-A4, or 2022-2019, or 3 years. Recall that Pathway Gardens takes no
depreciation in the year of acquisition, but takes a full year’s depreciation in the year
of disposal. This computation is consistent with that.
Enter “=SYD(D4,E4,B4,$B$1-A4)” into H4 as shown in Exhibit 1.19.

EXHIBIT 1.19

Note that we use an absolute reference, $B$1, for the current year. This is so we
can continue to reference this cell when we copy the formula down for other fixed
assets.
Step 3
Highlight the cells F4:H4, right click to Copy, and Paste for all fixed assets below
(through row 20).
At the bottom of the list in row F20:H20, insert a single bottom border.
In cells F21:H21, sum each column of depreciation expense.
In cells F21:H21, insert a double bottom border.
Optional: Format each cell using the “comma” format and no decimal places.
Share the Story

We have now computed the depreciation for Pathway Gardens using three different
depreciation methods. We now have the information we need to compare each
method. This data analytics can help us determine which depreciation method
should be used.
Assessment:
1. Take a screenshot of the depreciation schedule for 2022 and label it “Lab 1-2 Submission 1.jpg”.
page 29
2. The lab presumes the depreciation expense for the year 2022. If we replace “2023” for “2022” in
cell B1, we can compute the depreciation expense for the year 2023. Take a screenshot of the depreciation
schedule for 2023 and label it “Lab 1-2 Submission 2.jpg”.
3. Answer the multiple choice questions in Connect.

Lab 1-2 Alternate

Apply the same steps as Lab 1-2 to the Lab 1-2 Alt Data.xlsx dataset. Open Excel
File Lab 1-2 Alt Data.xlsx.
Required:

Calculate depreciation expense using straight-line depreciation, double declining

balance and sum-of-the-year’s digits depreciation.
Assessment:
1. Take a screenshot of the depreciation schedule for 2022 and label it “Lab 1-2 Alt Submission 1.jpg”.
2. The lab presumes the depreciation expense for the year 2022. If we replace “2023” for “2022” in cell B1, we
can compute the depreciation expense for the year 2023. Take a screenshot of the depreciation schedule for
2023 and label it “Lab 1-2 Alt Submission 2.jpg”.
3. Answer the multiple choice questions in Connect.

page 30

Lab 1-3 Creating a Mortgage Amortization

Schedule
Keywords
financial accounting, loan amortization, fixed assets

Lab Insight
In financial accounting, we account for the bond issuance as well as bond and
interest payments. It is important to know the portion of the bond payment that goes
toward interest and what portion goes toward principal (to pay down the amount of
the loan).
Companies create bond amortization schedules to keep track of the amount of
principal and the amount of interest paid.
Companies make bond payments. You and I make mortgage payments when we
buy a home. Because both bond and mortgage payments include both an interest and
a principal component, it is useful to derive a mortgage (or bond) amortization
 schedule. While we will show a mortgage amortization, the steps we take in Excel
are the same for a bond payable (traded at par) for a company.
In this lab, we’ll keep track of the mortgage payments and derive a mortgage
amortization schedule.
Required:
1. Calculate the monthly payment for a 30-year mortgage loan.
2. Calculate the amount of interest that you’d pay for a 30-year mortgage loan.

Ask the Question

How much interest do you pay over the life of a 30-year mortgage?

Master the Data

There is no data file for this lab. We will make the needed calculations and input the
data as we go.
To compute the mortgage payments, we’ll need to know a few things:
1. The size of the mortgage loan
2. The interest rate
3. The length of the loan (number of months)

Let’s suppose you would like to buy a home for $250,000. But like most U.S.
citizens, you don’t have enough cash on hand to pay for the full house. But we’re in
luck! Signature Bank has agreed to offer you a 30-year mortgage loan, but requires
that you pay 20 percent down ($50,000 = 20% of $250,000) to qualify for their
mortgage loan of $200,000 in this way:
$250,000Cost of home
50,000 Required 20% down payment ($50,000 = 20% of $250,000) (The cash
you need to have available to pay when closing on the home)
$200,000Amount of the bank loan

Perform the Analysis

The bank offers you a $200,000 loan at 6 percent annual interest with monthly
payments for the next 360 months (30 years × 12 months). The first step is to
compute the monthly mortgage payment.

page 31
We first compute the monthly interest rate. In Excel, open a new spreadsheet and
enter the data. We take the annual interest rate of 6 percent and divide by 12 months
to get a monthly interest rate of 0.5 percent or 0.005 (as shown in Exhibit 1.20).
 EXHIBIT 1.20

We next compute the monthly payment using the PMT() requires the following
parameters (as shown in Exhibit 1.21):

EXHIBIT 1.21

where:
Rate: Monthly interest rate of 0.005, which is 6 percent divided by 12 months.
Nper: Number of periods, which is 360 monthly payments (30 years × 12
months).
Pv: Present value, which is the amount of the loan of $200,000.
To insert the parameters into the PMT function, we input “=PMT(B2, B3, B4)”
and hit Enter (as shown in Exhibit 1.22). With this calculation, we compute a
monthly payment of $1,199.10. It is in red font because it is a monthly payment, a
cash outflow, or the amount of monthly income you have to give up (as shown in
Exhibit 1.23).
 EXHIBIT 1.22

EXHIBIT 1.23

page 32
We’ll now start the mortgage amortization schedule. We define an amortization
schedule as a table detailing each periodic payment to ultimately pay off the
loan/debt. The amortization schedule details the amount of the monthly payment, the
interest payment, and the principal as well as the amount of principal remaining to
be paid.
Label cell A7, the far-left column, “Monthly Payment Number” and starting in
cell A8, add a number below it from 1 to 360, representing the months of the
mortgage (30 years × 12 months = 360 payments).
Select the first cell in the range you want to fill. Type 1 as the starting value.
Then, select the cells and drag the fill handle (highlighted box) down the column,
and select “Fill Series” to fill in the numbers (as shown in Exhibit 1.24).

EXHIBIT 1.24

Next, label the next column (B7) “Beginning Principal.”

Next, label the next column (C7) “Monthly Payment.” This is the amount of the
monthly payment we just computed.
 Next, label the next column (D7) “Towards Interest.” This is the part of the
monthly payment that goes toward the interest owed.
Next, label the next column (E7) “Towards Principal.” This is the part of the
monthly payment that reduces the amount of the loan.
Next, label the next column (F7) “Ending Principal.” This is the amount of
principal after the reducing the amount paid this month towards principal.
Add a bottom border under each title so it looks something like Exhibit 1.25.

EXHIBIT 1.25

For Beginning Principal (cell B8), insert the reference “=B4” and click Enter to
show the amount of the loan ($200,000).
For Monthly Payment (cell C8), insert the reference “=$B$5” the amount of the
monthly payment of ($1,199.10) we computed. Note we make it an absolute
reference by adding additional $ to make it $B$5.
For Towards Interest (cell D8), multiply the beginning principal of the loan by
the monthly interest rate in B2, or “=B8*$B$2”. Note we make it an absolute
reference by adding additional $ to make it $B$2. This will compute the page 33
amount of interest we owe on the loan this month.
For Towards Principal (cell E8), the amount going toward principal is the
amount of the monthly payment that is greater than the interest paid. Insert
“=C8+D8”.
For Ending Principal (cell F8), it is the Beginning Principal less the amount
Towards Principal. So, insert “=B8+E8”.
For a summary of where we are and the formulas that need to be input, note the
following (as shown in Exhibit 1.26).
 EXHIBIT 1.26

This will result in Exhibit 1.27.

EXHIBIT 1.27

Starting in row 9 of the spreadsheet or the second line, please do the following:
For Beginning Principal (cell B9), the Ending Principal of the first payment is
the Beginning Principal of the second payment. Insert “=F8”.
For Monthly Payment (cell C9), insert the reference “=$B$5”, which is the
amount of the monthly payment of ($1,199.10) we computed.
For Towards Interest (cell D9), multiply the beginning principal of the loan by
the monthly interest rate in B2, or “=B9*$B$2”. This will compute the amount of
interest we owe on the loan this second month.
For Towards Principal (cell E9), the amount going toward principal is the
amount of the monthly payment that is greater than the interest paid. Insert
“=C9+D9”.
For Ending Principal (cell F9), it is the Beginning Principal less the amount
Towards Principal. So, insert “=B9+E9” (as shown in Exhibit 1.28).

page 34

EXHIBIT 1.28
 This will result in Exhibit 1.29.

EXHIBIT 1.29

At this point, we are ready to copy down all the way from the 2nd payment to
the 360th payment. So, copy cells B9 to F9 by highlighting cells B9:F9 and hitting
<Control-C>, or <Command-C>. And paste by entering <Control-V>, or
<Command-V> for cells B10:F367.
The way to check and see if the mortgage amortization table is complete is by
making sure the ending principal by the 360th payment is $0. We note that in this
case, it is $0 at the end (as shown in Exhibit 1.30).

EXHIBIT 1.30

With this computed, we can now compute the total interest paid over the 30
years, by summing the “Towards Interest” or “Interest Expense” column. For this
problem, we sum the interest paid and realize that we paid $231,676.38 in interest.
More than the total loan of $200,000! So, we will pay $431,676.38 in principal and
interest for a $200,000 loan (as shown in Exhibit 1.31).
 page 35

EXHIBIT 1.31

Share the Story

Accountants need to know how much of each monthly mortgage (or bond) payment
goes toward interest.
Assessment:
1. Take a screenshot of the top 20 lines of your 360-month amortization schedule and label it “Lab 1-3
Submission.jpg”.
2. Answer the multiple choice questions in Connect.

Lab 1-3 Alternate

For this section of the assignment, you are to make a similar amortization schedule
for a $200,000 mortgage loan at 6 percent interest for two additional time periods,
15 years and 6 years. So, instead of 360 months (30 years), use 180 months (15
years) and 72 months (6 years).
Required:
1. Calculate the monthly payment for a 15-year and a 6-year mortgage loan.
2. Calculate the amount of interest that you’d pay for a 15-year mortgage loan and a 6-year mortgage loan.

Assessment:
1. Take a screenshot of the top 20 lines of your 180-month amortization schedule and label it “Lab 1-3 Alt
Submission 1.jpg”.
2. Take a screenshot of the top 20 lines of your 72-month amortization schedule and label it “Lab 1-3 Alt
Submission 2.jpg”.
3. Answer the multiple choice questions in Connect.

page 36

Appendix A Excel Tutorial (Formatting, Sorting,

 Filtering, and PivotTables)

We expect you already have a basic understanding of Excel from your other classes.
As a review and to gain a few more skills we offer this basic tutorial which has the
following elements:
1. Basic formatting of an income statement using Excel function SUM().
2. Basic data manipulation (filters, sorts, PivotTables).

Basic Formatting of an Income Statement Using

Excel Function SUM()
Suppose we want to put the following data into the appropriate income-statement
format:
Revenues 50000
Expenses
Cost of Goods Sold 20000
Research and Development Expenses 10000
Selling, General, and Administrative Expenses 10000
Interest Expense 3000

Required:

1. Key in the data above as shown and add a comma as a 1000 separator for each
number.
2. Insert the words “Total Expenses” below the list of expenses.
3. Calculate subtotal for Total Expenses using the SUM() command.
4. Insert a single bottom border under Interest Expense and under the Total Expenses
subtotal.
5. Insert the words “Net Income,” and calculate Net Income (Revenues – Total
Expenses).
6. Format the top and bottom numbers of the column with a $ currency sign.
7. Insert a bottom double border to underline the final Net Income total.
Solution:

1. Key in the data above as shown and add a comma as a 1000 separator for each
number.
Type in the data into the spreadsheet starting with cell A2 with the word
“Revenues”. Highlight the column with all the numbers. Right click on Format
Cells… to open the dialog box shown in Exhibit 1A.1.
 EXHIBIT 1A.1

page 37
Click on Number and Set Decimal Places to Zero. Click on Use 1000
Separator (,) and Click OK.
2. Insert the words “Total Expenses” below the list of expenses.
Type “Total Expenses” at the bottom of the list of expenses.
3. Calculate subtotal for Total Expenses using the SUM() command.
Use the SUM() command to sum all the expenses, as shown in Exhibit 1A.2. The
output appears in Exhibit 1A.3.

EXHIBIT 1A.2

EXHIBIT 1A.3
4. Insert a single bottom border under Interest Expense and under the Total Expenses
subtotal.
Use the border icon located in the Font toolbar on the Home tab to add the
bottom border (as shown in Exhibit 1A.4).

EXHIBIT 1A.4

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5. Insert the words “Net Income” and calculate Net Income (Revenues – Total
Expenses).
Type “Net Income” at the bottom of the spreadsheet. Calculate Net Income by
inserting the correct formula in the cell (here, =B2-B9), as shown in Exhibit 1A.5.

EXHIBIT 1A.5

6. Format the top and bottom numbers of the column with a $ currency sign. Right
click on each number and Format Cells, select currency, and no decimal points (as
shown in Exhibit 1A.6).
 EXHIBIT 1A.6

7. Insert a bottom double border to underline the final Net Income total.
Place your cursor on the cell containing Net Income (7,000). Then select Bottom
Double Border” from the Font > Borders menu.

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The final project is shown in Exhibit 1A.7.

EXHIBIT 1A.7

BASIC DATA MANIPULATION (FILTERS, SORTS,

PIVOTTABLES)
1. Open Lab 0 Appendix Data.xlsx.
2. Look at the data.

Sorting the Data

3. Let’s sort the data. To do so, go to Data > Sort & Filter > Sort (as shown in Exhibit
1A.8).

EXHIBIT 1A.8

4. Let’s sort by sales price from largest to smallest. Input Sales into the Sort by, select
Largest to Smallest in the dialog box, and select OK (as shown in Exhibit 1A.9).

EXHIBIT 1A.9
 The highest sales price appears to be apricots at a cost of $140 (Exhibit 1A.10).

EXHIBIT 1A.10

Looking down at the bottom of this list, we see that the lowest sales price
appears to be bananas for $2.52.

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FILTERING THE DATA

Next, let’s filter the data to only look at only the banana transactions.
5. Let’s sort the data. To do so, go to Data > Sort & Filter > Filter.
6. An upside-down triangle (or a chevron) will appear. Click on the chevron in cell F1,
click on Select All to unselect all, and then select only the word “Banana.”
7. The resulting data should appear (as shown in Exhibit 1A.11).

EXHIBIT 1A.11

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8. Alternatively, we could filter based on date to get all transactions on
3/2/2021. We first need to clear the filter in cell F1, by clicking on the Filter symbol
and selecting “Select All.”
9. Click on the chevron in cell D1, click on Select All to unselect all; then select only
 the word “2021,” then “March,” then “2” (as shown in Exhibit 1A.12).

EXHIBIT 1A.12

PivotTables
10. Let’s compute the accumulated gross margin for bananas, apricots, and apples.
11. First, unclick the filter at Data > Sort & Filter > Filter by clicking on and
unselecting Filter.
12. Next, let’s compute the gross margin for each line item in the invoice. In cell J1,
input the words “Gross Margin.” Underline it with a bottom border. In cell J2, input
“=H2-I2” and hit <Enter> as shown in Exhibit 1A.13.

EXHIBIT 1A.13

13. Copy the result from cell J2 to J3:J194.

14. Now it is time to use the PivotTable. Recall that a PivotTable summarizes selected
columns in a spreadsheet but doesn’t change the spreadsheet itself. Recall we are
trying to summarize the accumulated gross margin for bananas, apricots, and apples.
15. Select Insert > Tables > PivotTable.
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Analytics Tool: Excel PivotTables

PivotTables allow you to quickly summarize large amounts of data. In Excel, click Insert >
PivotTable, choose your data source, and then click the checkmark next to or drag your fields to
the appropriate boxes in the PivotTable Fields pane to identify filters, columns, rows, or values.
You can easily move attributes from one pane to another to quickly “pivot” your data. Here is a
brief description of each section.
Rows: Show the main item of interest. You usually want master data here, such as customers,
products, or accounts.
 Columns: Slice the data into categories or buckets. Most commonly, columns are used for time
(e.g., years, quarters, months, dates).
Values: This area represents the meat of your data. Any measure that you would like to count,
sum, average, or otherwise aggregate should be placed here. The aggregated values will combine
all records that match a given row and column.
Filters: Placing a field in the Filters area will allow you to filter the data based on that field, but it
will not show that field in the data. For example, if you wanted to filter based on a date, but didn’t
care to view a particular date, you could use this area of the field list. With more recent versions of
Excel, there are improved methods for filtering, but this legacy feature is still functional.

16. Make sure all data is selected as follows in Table/Range and select OK (as shown in
Exhibit 1A.14).

EXHIBIT 1A.14

17. The empty PivotTable will open in a new worksheet, ready for the PivotTable
analysis.

Inputs into PivotTable

Columns:
Rows: [Description]
ΣValues: [Gross Margin]

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Drag [Description from PivotTable Fields into the Rows and [Gross
Margin] from FIELD NAME into ΣValues fields in the PivotTable. The ΣValues
will default to “Sum of Gross Margin.”
The resulting PivotTable will look as shown in Exhibit 1A.15.
 EXHIBIT 1A.15

18. The analytics suggests that the gross margin for apples is $140.39; for apricots,
$78.02; and for bananas, $77.08.

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Appendix B Tableau Tutorial

Tableau is a tool for data visualization. It has drag-and-drop functionality to

showcase your data similar to a PivotTable, but its default is to visualize your data
(not to show it in a tabular format the way a PivotTable does).
Here is a quick introduction to pieces of the Tableau canvass (as shown in
Exhibit 1B.1).
 EXHIBIT 1B.1
©Tableau Software, Inc. All rights reserved.

Tableau can connect to a variety of datatypes, including Excel, Access, and SQL
Server. We will connect to the dataset Lab 0 Appendix Tableau Data.xlsx.
Open Tableau.
Immediately upon opening Tableau, you will see a list of file types that you can
connect to. We’ll connect to an Excel file, so click Microsoft Excel (as shown in
Exhibit 1B.2).

EXHIBIT 1B.2
 ©Tableau Software, Inc. All rights reserved.

Navigate to where your file is stored, highlight the file and click Open.
Tableau automatically detects the data types of the attributes you import. In this
dataset, the attributes probably all imported as the data type you would expect.
Notice that the first two, Invoice # and Customer # imported as number. Continue
looking at the attributes, and you will notice the globe icon above Zip Code. This is
Tableau showing you one of its best features, it shows that the Zip Code data was
imported as geographic data. This will allow you to create maps (as shown in
Exhibit 1B.3).

EXHIBIT 1B.3
©Tableau Software, Inc. All rights reserved.

To begin working with the data, click Sheet 1 in the bottom left (as shown in
Exhibit 1B.4).

EXHIBIT 1B.4
©Tableau Software, Inc. All rights reserved.

To begin working with the data, double click on the measure Gross Margin (as
shown in Exhibit 1B.5).
 EXHIBIT 1B.5
©Tableau Software, Inc. All rights reserved.

page 45
You will immediately see how Tableau interacts with data differently than Excel by
default because it has defaulted to displaying a bar chart. This isn’t a very
meaningful chart as it is, but you can add meaning by adding a dimension.
Double click Description from the dimensions.

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Similar to the analytics found in Appendix A regarding PivotTables, you find the
 same numbers: apples with a gross margin of 140.4, apricots with a gross margin of
78.0, and so on.
To make this data easier to interpret, you can sort it. Click the Sort Descending
icon to sort the data (as shown in Exhibit 1B.6).

EXHIBIT 1B.6
©Tableau Software, Inc. All rights reserved.

As we’ll learn throughout the text, Tableau allows for easy visualizations of the
data.
Unless otherwise credited screenshots: Source: Microsoft Excel
Magnifying glass: PureSolution/Shutterstock

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