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5 Real-Life Accounting Stories and Illustrations to Engage Students

To help students relate to the material, Eugene H. Cantor, LLM, CPA, presents real situations to personalize key accounting terms and concepts.


Eugene H. Cantor, LLM, CPA

Associate Clinical Professor of Accounting and Information Assurance, University of Maryland, College Park

JD, LLM in Taxation, BS in Accounting

The life of Eugene Cantor, LLM, CPA, is brimming with interesting stories. He spent 31 years in federal service, including stints at the US Treasury Department and the Securities & Exchange Commission (as an attorney) and at the US General Accounting Office (as an investigative auditor). He also practiced law in Miami as a corporate and tax attorney and as general counsel for an investment banking firm.

However, when teaching students at his alma mater—the University of Maryland—it is a more relatable story that he uses to kick off his course in Foundations of Accounting for Non Business Majors. “I bombed my first two accounting exams in my sophomore year of college,” he tells students. Then a friend advised him to roll up his sleeves and actually work the homework problems—a mantra that he suggests students follow, too. “You can’t just watch the professor work the problems and think you’ve learned how to work them,” he says. “It’s like chess. You can study it, but you don’t learn it until you actually play it.”

Admitting that bit of failure helps connect Cantor to his students, he says. “It makes them see that I understand that accounting is difficult and requires lots of practice. So if they struggle, they should understand that I did too and that I found the ‘secret’ to success in accounting as a result.”

Cantor first got the idea of using storytelling in his teaching while attending a seminar on communication that was taught by actors. It helped him realize that emotion and personal narrative were powerful tools to boost student engagement and clarify dense or abstract concepts. He also recalled some of the ways his own teachers made material relevant to him—and how he even told himself stories, talking himself through accounting problems as he worked them.

With these inspirations as guides, Cantor has developed numerous stories and illustrations, including visual aids, to make accounting concepts more relatable to students. Here are five accounting instruction activities he uses to help make accounting principles more relevant to—and especially memorable for—his students.


“You can’t just watch the professor work the problems and think you’ve learned how to work them. It’s like chess. You can study it, but you don’t learn it until you actually play it.”

— Eugene Cantor, LLM, CPA

Course: BMGT210 Foundations of Accounting for Non Business Majors

Course description: Provides an understanding of the common statements that report a company’s profitability and financial health, and are useful to all economic agents who are engaged with the firm. Students will also recognize and understand managerial accounting as a system for accumulating and modeling information to support decision-making.

See resources shared by Eugene Cantor, LLM

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5 of Cantor’s most compelling accounting stories

Cantor’s approach motivates students to learn accounting principles by making the material relatable to them personally, through storytelling. He says that students tell him that they love the approach. While he has not tried to quantify the success of his methods, student feedback lets him know that the method is effective. “Now when former students see me, they don’t just cough up a principle,” he says. “They recall a story or analogy that ties to that principle.”

Here, Cantor shares five examples of his story-based instruction.

1. “Can you help me with a problem?” (to teach the managerial accounting concept of budgeted capacity)

To teach students about the concept of “budgeted capacity” in managerial accounting—a concept that involves how production departments in a company should be charged back for the use of service department resources—Cantor puts students in the role of consultants. He walks into class with a mock invoice from his university’s copy center and says, “I have a problem with the accounting department chair. Can you help me? You guys have a little experience in managerial accounting.” At first, his students look at him with a “What the heck?” expression, he says. “But they want to help.”

Cantor tells his students that the accounting department chair is furious with him and that his job is on the line. The invoice indicates that the accounting department is supposed to pay the copy center $250,000 for 150 copies that Cantor ordered for his classes. “I look at the students and say, ‘What’s wrong here? How can 150 copies cost so much?’” The point of the exercise is to teach students how service department costs should be billed to production departments. The convention is to bill fixed costs (the cost of rent, depreciation on machinery, and salaries) based on budgeted use, and variable costs (paper and toner) based on actual use.

In the exercise, students can see that Cantor was virtually the only professor who used the copy center, and as a result, he was billed not only for the variable costs of his printing but also for the majority of the fixed costs the copy center incurred to staff for the projected copy demand for the year. Because the fixed costs were incurred by the copy center to create the capacity needed to meet each department’s planned usage (based on responses from the department heads to an initial survey by the copy center), Cantor should not have been billed for the majority of the fixed costs merely because the other departments did not use the copy center as planned.

The illustration helps students understand the concept of planned capacity as well as the behavior of fixed and variable costs in an actual managerial accounting setting. Not only do they learn the concept of budgeted capacity but they gain an appreciation of the value of an understanding of managerial accounting. Here, that understanding saved Cantor’s job; perhaps in the future it could save theirs.

2. “What have you earned?” (to teach revenue accruals)

To teach accrual accounting, which records revenue and expenses as they are earned or incurred versus when cash changes hands, Cantor recites this basic rule and moves to an example to which students can relate.

He asks students to imagine that they just got a job working for him at a salary of $1,000 a week, receiving paychecks biweekly (every other week). He then asks them how much they each have earned after their first week of work.

“Most say they haven’t earned anything,” says Cantor. “But they have. They just haven’t been paid yet.” He then asks them how they would feel if he closed his business down after the first week and refused to pay them. “Well, you owe us the money for one week’s pay,” they respond. “But,” Cantor responds, “you said you haven’t earned anything, right?” Students come to realize that revenue is earned when the services are performed, not when payment is made. He then discusses how his company must show a liability and record a salary expense for the first week’s work, even though the salaries have not been paid. Cantor says, “It focuses the student’s mind when they pretend they’re talking about their own money and earnings.”

3. “Is your tank half empty?” (to teach expense accruals)

To clarify that expenses (e.g., salaries or rent) are accounted for not when paid but rather when incurred, Cantor takes students to a familiar spot—the gas pump. “When I pull up to a gas station and fill my car up, it costs $40,” Cantor tells the class. Then he asks the students, “Am I any poorer for this?”

He says that students typically nod yes and tell him that he is out $40 for the expense. Then Cantor asks, “What about the tank of gas that I didn’t have before?”

He says a light goes on in the students’ heads. Oh yeah, you got the gas. This is a way to illustrate that you actually incur the expense as you drive and use the gas.

4. “Should we split the check?” (to teach direct and indirect costs—i.e., overhead)

Companies incur both direct costs, such as materials and labor, and indirect costs, such as overhead (e.g., factory depreciation). Cantor wants students to question: What does it really cost me to manufacture something?

Cantor starts his lecture on overhead by telling students that he went out to lunch with retired friends who always want to split the check. “I tell them that I know exactly what I had for lunch—a BLT for $7—and I don’t want to split the check,” he says. One friend responded with “OK, fine, but what about the pitchers of beer we all drank?” Cantor concedes that his friend has a point. “This brings up the idea of allocating the cost, which is what you do for overhead,” he says.

Deliberating over this conflict becomes fun for students since, of course, everyone can relate to a tale like this. They begin to ask questions like: How should the check be split? How can you tell how much beer each person drank? Cantor says a student once asked, “Did you keep track of how many glasses you had?” Students have fun suggesting ways to measure the cost allocations to each of the diners, such as counting glasses (how do we measure if some diners fill their glasses when they are half full and others fill after draining the glass), using a breathalyzer (is that fair to the smaller diners), or basing the bill on individual size (is that fair to the diners with more girth).

5. “Can blocks be used to recapture depreciation?” (to teach the concept of depreciation recapture in taxation)

In this activity, Cantor uses colored blocks to illustrate the concept of depreciation recapture. This is a complex tax concept that can vex accounting students. Depreciation recapture treats the portion of the gain on the sale of a depreciable asset that results from the reduction in the asset’s basis (i.e., book value) due to depreciation taken on the asset. Gains that come from actual appreciation in the asset may be treated as a capital gain, which generally is taxed at a lower rate than ordinary income. Simply put, the concept of recapture prevents taxpayers from converting depreciation tax deductions into capital gains.

To illustrate this concept, Cantor uses colored blocks. “Assume the taxpayer purchases a machine for $1,000,000,” he says. He uses 60 blocks to represent that amount: There are three stacks of 10 green blocks behind three stacks of 10 red blocks. Cantor removes the red blocks a few at a time to represent depreciation on the building. As red blocks go down, students can see visually that the book value of the building goes down, too. The building’s book value is represented by the red blocks that remain, and the exposed green blocks represent the depreciation that has been taken on the building.

Cantor then uses a third set of blocks to illustrate the selling price of the machine for $1,000,000, the amount of the original cost. He asks the students if it is fair to have the taxpayer deduct the depreciation against ordinary income and pay tax on the gains at capital gains rates. By studying the blocks, students can see that the gain was created by the depreciation and are able to grasp how depreciation recapture is needed to prevent taxpayers from benefiting merely from an arbitrage in tax rates applicable to tax deductions versus capital gains. Cantor says he has former students who have actually used the colored blocks method in their careers when they got confused about matters ranging from taxes to stock options.

Cantor says these examples show how storytelling and the use of actual and mental visual aids can be a compelling tool for bringing to life a variety of accounting principles. “Of course, you can exaggerate for effect,” he adds. “But there’s got to be a ring of truth to storytelling to make it plausible. After our class discussion, students often ask if the situation was real. I tell them that my class examples are always based on real stories. Because they are! (Perhaps with a little embellishment.)”

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