On the first day of Principles of Accounting classes, students learn the fundamental accounting equation from which all financial accounting practice emerge. The accounting equation is the criterion by which companies are valued and by which company performance is measured. This activity simplifies assets, liabilities, and owners’ equity to the representation of M&M’s® in order to focus on overall patterns of company structure and provides further illustration using real public U.S. companies’ assets, liabilities, and owners’ equity.
This assignment allows students to develop individual understanding of the accounting equation using randomized packs of M&Ms. The students manipulate the equation based on the color of the M&Ms and questions about the meaning of each student’s results within the context of business. The second stage of the assignment is to apply the fundamental accounting equation to real companies’ financial statements and discuss the results in a classroom format.