Master The Data: An Introduction To Accounting Data: A Look Back

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Chapter 2
Master the Data: An Introduction to
Accounting Data
A Look Back:
In Chapter 1, we emphasized how computerization and the availability of data is changing
the role of the accountant as an information provider. We proposed the AMPS model as a
framework for performing Data Analytics, consistent with accountants developing an
analytics mindset. Finally, we explored the type and scope of questions that decision makers
ask as the first component of the AMPS model.
A Look at This Chapter:

The availability of data for business and accounting is changing the business world and is
important as we address the second component of the AMPS model, Master the Data. In this
chapter, we introduce the types of questions we can address with data analytics. We also
introduce data sources that you will see in your accounting career whether generated and
owned by the company (like from a financial reporting system or supply chain system) or
from outside the company. We’ll discuss how data can inform accounting decision making.
A Look Ahead:
Chapter 3 provides a description of how data comes, categorical and numerical. We’ll
introduce data dictionaries, and explain how they are used to get to know and use the
available data. We’ll also discuss how data is used to make informed decisions.
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PwC requests its auditors develop the following skill sets, both in terms of core skills and evolving skills.
Note the importance of Data Analytic skills, handling new sources of data, using exploratory statistics and
visualizations, and bringing value to the business. The role of the accountant/auditor has changed, and
new skills are required to “use new insights to bring new value to the business.”
PwC recommendations for evolving skill sets for an auditor:

Current skills New skills likely to be needed
An understanding of the How to:
fundamentals of accounting,
including financial accounting, 1. Research and identify anomalies and risk factors in
managerial accounting, taxation, underlying data
and financial reporting systems
2. Mine new sources of data (must possess a base
Knowledge of generally
accepted accounting principles, level of programming knowledge) and use insights
policies, procedures, and to bring new value to the business
auditing standards How to tie 3. Understand databases that are relational (a data
accounting needs back to
regulatory needs structure that allows linking information from
different types of data buckets) and non-relational
(data stored without structured mechanisms to link
data from different buckets to one another)
4. Use exploratory multivariate statistics, inferential
statistics, visualization tools, optimization methods,
machine learning, and predictive analysis tools
5. Process-mine using new data analysis techniques
and algorithms, to isolate and investigate specific
processes that might have led to changes to the
data/accounting ledgers
Source: “Data Driven: What Students Need to Succeed in a Rapidly Changing Business World” PwC,
February 2015, p. 11, https://cpb-us-w2.wpmucdn.com/sites.gsu.edu/dist/1/1670/files/2015/08/pwc-data-
driven-paper-1wdb00u.pdf (accessed January 23, 2019).
OBJECTIVES
After reading this chapter, you should be able to:
LO 2-1 Explain how Data Analytics is used to answer accounting questions.
LO 2-2 Explain how mastering the data serves as the second component of the AMPS model.
LO 2-3 Define Big Data and describe its characteristics.
LO 2-4 Describe what accounting data is available.
LO 2-5 Explain how nonaccounting data can enhance accounting.
LO 2-6 Describe some basics of analyzing accounting data.
LAB 2-1 Accounts Receivable Summary by Customer (Excel)
LAB 2-2 Accounts Receivable Summary by Customer (Tableau)
LAB 2-3 Inventory Management by Customer Profitability (Excel)
LAB 2-4 Inventory Management by Customer Profitability (Tableau)
LAB 2-5 Inventory Management by SKU Profitability (Excel)
LAB 2-6 Inventory Management by SKU Profitability (Tableau)
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DATA, DATA ANALYTICS, AND ACCOUNTING!
LO 2-1
Explain how Data Analytics is
used to answer accounting
questions.
Data surrounds us and data defines us! In fact, as of 2020, about 1.7 megabytes of new
information will be created every second for every human being on the planet. More data has
been created in the last two years than in the entire previous history of the human race.1
At the push of a button (or click of a mouse), you can get balance sheets and income
statements, stock prices and analyst estimates, conference calls and sales reports for both
large publicly traded organizations like Netflix and small businesses like Odd Job Bob
Handyman Repair Shop with very little effort. It isn’t necessarily the volume or availability
of data that is important, but rather how we analyze it and use it that creates value. With Data
Analytics knowledge and tools, we can evaluate that data in a way that can answer
fundamental accounting questions and create value for the company.
Expanding on the definition of data analytics introduced in Chapter 1, Accounting Data
Analytics is encapsulated as the technologies, systems, practices, methodologies, databases,
statistics, and applications used to analyze diverse accounting and nonaccounting data to give
organizations the information they need to make sound and timely business decisions.2 In
accounting, Data Analytics can be used to find fraud; to value receivables and inventory; to
value property, plant, and equipment; to value goodwill; to estimate budgets; and more. For
example, we can use Accounting Data Analytics to:
Evaluate characteristics of the journal entries (e.g., who recorded them, at what amount,
who authorized them, etc.) to find errors or fraud in the journal entries.
Consider how the product reviews on Walmart’s website can help predict which inventory
items will be sold and which ones won’t be sold to help determine if the inventory will
become obsolete, and estimate the appropriate value of inventory on its balance sheet.
Predict the right level of the Allowance for Doubtful Accounts by classifying which of our
customers will be able to pay their debts based on information we know about an individual
customer’s payment history.
Audit and verify account balances. Auditors look for evidence supporting the amounts and
disclosures in the financial statements. An audit assesses the accounting principles used and
significant estimates made and evaluates the overall financial statement presentation.
Predict when goodwill is or soon will be impaired using social media, the business press, or
recent accounting performance.
Estimate the fixed and variable costs to help predict the level of sales required for a business
to breakeven.
Predict the level of future sales returns (items returned, refunds, etc.) from a period’s sales
amounts to compute net sales as required by GAAP.3
Minimize the amount of taxes paid by using data to help select which tax deductions the
company should take.
Indeed, effective data analytics provides a way to search through large data to discover
unknown patterns or relationships.4
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PROGRESS CHECK
1. How does analyzing more and diverse data around us help answer accounting questions? Give a specific
example.
2. What data could you use to see if the current iteration of the iPhone is not selling as well as it could be?
MASTER THE DATA: THE SECOND COMPONENT OF

THE AMPS MODEL
LO 2-2
Explain how mastering the data
serves as the second component
of the AMPS model.
In Chapter 1, we introduced the AMPS model as our framework for performing data
analytics. As you recall, the AMPS model stands for:
Ask the Question (Chapter 1).
Master the Data (Chapters 2–4).
Perform the Analysis (Chapters 5–9).
Share the Story (Chapter 10).
In Chapter 1, we discussed the importance of asking a specific question that can

potentially be answerable by data, the “A” from the AMPS model to “Ask the Question.” We
discussed the importance of defining the scope and the specificity of the question. Once we
know the question being asked, we are able to turn to possible data sources that might help us
address and potentially answer the question.
In this chapter, we elaborate on what is needed to “Master the Data,” or the “M” from the
AMPS model, by considering accounting and nonaccounting data sources available for our
data analysis that includes data all the way from financial statements to macroeconomic
statistics, from supply chain data to financial analyst reports. Part of “Mastering the Data” is
to learn and become aware of the variety of data sources available to answer our accounting
questions.
PROGRESS CHECK
3. Why does the AMPS model start with asking the question and then finding appropriate data to answer the
question rather than seeing what data is available before forming the question?
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WHAT IS BIG DATA?
LO 2-3
Define Big Data and describe its
characteristics.
You’ll often hear the term Big Data when you’re talking about Data Analytics. We define Big
Data as datasets that are too large and complex for businesses’ existing systems (traditional
capabilities) to capture, store, manage, and analyze.
Big Data is often described using the four Vs: volume, variety, velocity and veracity
shown in Exhibit 2.1.
EXHIBIT 2.1
The Four Vs of Big Data: Volume, Variety, Velocity and Veracity
Source: EY, “Big Data: Changing the Way Businesses Compete and Operate,” Insights on Governance, Risk,
and Compliance, April 2014, p. 2, https://www.ey.com/Publication/vwLUAssets/EY_-
_Big_data:_changing_the_way_businesses_operate/%24FILE/EY-Insights-on-GRC-Big-data.pdf.
Volume is the sheer amount of data, regardless of its source. It might come from corporate
systems, clickstream data from social media (e.g., Facebook, Instagram, Blogs, etc.), the
government (e.g., census records), speeches by the CEO, press releases from the company,
word searches from internet search engines (e.g., Google, Yahoo!), or just the internet in
general. Indeed, Eric Schmidt, CEO of Google says, “Every two days we now create as much
information as we did from the dawn of civilization up until 2003.”5 Finding which of all of
the mounds of data that is relevant to a decision maker is often one of the biggest challenges
facing the data analyst.
Variety is the form of the data. Structured data is highly organized. It fits neatly in a
table or in a database. The best example of structured accounting data is a balance sheet or
income statement, which comes in tabular format. Unstructured data is data without
internal organization (or structure). Blogs and social media and pictures posted in Instagram
would be examples of unstructured data. Some estimates suggest that 80 percent page 53
of enterprise data (things like emails, PDFs, and other documents) is
unstructured!6 In between those two extremes would be semi-structured data, with elements
of both structured and unstructured data. While semi-structured data does not have any
internal structure (like labeled columns), its data may come with tags or markers explaining
what the data represents. As an accounting example of semi-structured data, XBRL (as
explained later) puts tags on financial statement data so that computers can easily read and
evaluate financial statement data. The XBRL data is not organized as in tables but has tags
that explain what each number represents.
Velocity is the speed that the data is being generated (like stock prices that change on a
microsecond basis) or the rate that data is being analyzed (like continuously monitoring a
heart rate to analyze heart health). Stock prices are generated and analyzed much more
frequently than a company’s financial statements (which are generated monthly, quarterly, or
annually). Whereas stock prices might be generated and analyzed on a second-by-second
basis, a company’s financial statements might be generated and analyzed on a monthly or
quarterly basis.
Veracity is the underlying quality of the data. We define veracity in terms of whether the
data is truthful, accurate (and clean), and worthy of trust. Data with greater veracity is often
more impactful, carrying more weight in analytics than data with lesser veracity in
addressing accounting questions. Untrustworthy data can lead to incorrect conclusions.
Fact vs. estimate. In accounting, some data is generally considered factual (how much cash
does a company have in the bank), and other data is considered estimated (the value placed
on the Allowance for Doubtful Accounts or the value of intangible assets like goodwill) with
less veracity.
Accurate. Some data contains errors (when the accountant records a check received for the
wrong amount or depreciation is computed for the wrong year but included in this year’s
financials) or is missing data (when the accountant forgets to record the date of a transaction)
than other data. There is also the possibility that the accountant has changed the records in a
fraudulent way, also making them inaccurate. An example of fraud would be if the
accountant steals money and then changes the accounting records to cover up the theft.
Clearly, if the data is untrustworthy, irrelevant, inconsistent or biased, then the data does not
have near as much value to the data analyst or to the organization.7 Some suggest that
veracity is the cornerstone of Big Data and Data Analytics!8
PROGRESS CHECK
4. How would you evaluate a balance sheet that is reported for Amazon four times a year based on the four Vs
of Big Data (volume, variety, velocity and veracity)?
5. How would you evaluate veracity of data on the dimensions of fact versus opinion for data from Twitter vs.
data from a news broadcast vs. data from a balance sheet?
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WHAT ACCOUNTING DATA IS AVAILABLE TO

ANALYZE? A DISCUSSION OF ACCOUNTING DATA
SOURCES
LO 2-4
Describe what accounting data is
available.
There certainly is a lot of data available to address accounting questions. This section details
possible sources of accounting data. We start this discussion by learning what accounting
data is available to use, including financial accounting and related data, managerial
accounting data, and tax accounting data. In a subsequent section, we’ll discuss
nonaccounting data that can also be used to answer accounting-related questions.
Financial Accounting Data

Financial accounting data refer to materials prepared by a company to help decision makers
external to the company, such as stockholders, banks, and suppliers.
Financial Statement Data

The financial statements are an important source of information for accountants. Financial
statements are a collection of reports that communicate a company’s financial: results,
condition, health, and cash flows. These include the following four financial statements and
the related footnotes (which are integral to the financial statements):
Balance Sheet.
Income Statement.
Statement of Cash Flows.
Statement of Stockholders’ Equity.
Of all the financial accounting data, these are the statements most often consumed by both
internal and external users for multiple years and quarters. Financial statements are found at a
number of different locations. The company provides its annual report containing the
financial statements at its website, generally in the investor relations section. The Securities
and Exchanges Commission (SEC) keeps a repository of this information at its EDGAR
website (explained further later). Compustat also maintains a database of the financial
statement items. Yahoo! Finance (https://finance.yahoo.com/), for example, maintains
multiple years and quarters of financial statement data. Exhibit 2.2 shows financial
statements for NetFlix that appears on the Financials tab of Yahoo! Finance. Notice the
options for the statement type as well as the option for annual or quarterly statements.
EXHIBIT 2.2
Financial Statements for Netflix shown on Yahoo! Finance
Source: Yahoo! Finance, Accessed December 22, 2019
The financial statements are a great place to start accounting data analytics.
General Journal and Special Journal Entries and the General Ledger
The detailed journal entries recording transactions represent a key component of information
coming from the financial reporting system. Information such as which accounts are debited
or credited (as shown in the following example), the amounts of those entries, who recorded
the journal entry, and who authorized or approved the journal entry would all potentially be
relevant information to the data analyst.
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In contrast to a general journal where all types of transactions might be recorded, a
special journal is a journal where similar transactions can be recorded in an efficient
manner. For example, a sales journal recording all credits sales for a company might be a
source of analysis. A cash receipts journal details all of the transactions involving the receipt
of cash, which would certainly be useful when we’re doing a bank reconciliation. A cash
disbursements journal might be useful in figuring out what was paid, if the party paid is an
approved vendor, who authorized payment, who signed the checks, who made the journal
entry to record it, etc.
The general ledger summarizes all the journal entries, which forms the basis for the
financial statements. As such, the general ledger summarizes the collection of and current
balance of all asset, liability, equity, revenue, and expense accounts, resulting in another good
source of accounting data.
VERN’S INSIGHTS
One of the first things an auditor will ask for before starting an audit is the general ledger!
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Fixed Asset Subledger (or Subsidiary Fixed Asset Ledger)
While the general ledger summarizes the balance of all accounts, subsidiary ledgers detail
information on specific accounts with common characteristics. Firms keep detailed records
on of their fixed assets in a subsidiary fixed assets ledger. We define fixed assets as property,
plant (factories, office buildings, stores, etc.), and equipment (vehicles, fork lifts, computers,
machinery, power tools, technical apparatus, etc.). Accountants keep detailed records on the
purchase date, depreciation method, accumulated depreciation taken for both book and tax
purposes, betterments, and ultimate disposition. The detailed balance in each fixed asset
account included in the ledger supports the cumulative fixed asset balance included in the
general ledger and the balance sheet. Exhibit 2.3 provides an example of a fixed asset ledger,
where the original cost, accumulated depreciation and net book value (cost less accumulated
depreciation) conform with the amount on the balance sheet.
EXHIBIT 2.3
Example of a Fixed Asset Ledger
VERN’S INSIGHTS
For some multinational companies operating in multiple countries, depreciation systems must track eight or
more depreciation methods due to complexities in tax law and accounting methods.
Receivables Subledger (or Subsidiary Accounts Receivable Ledger)

The subsidiary accounts receivable ledger details information on the transaction history, the
payment history for each customer to whom the company extends credit, and the balance
owed by each customer. The detailed balance in each customer account supports and
reconciles with the total accounts receivable balance in the general ledger and the balance
sheet.
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Inventory Subledger (or Subsidiary Inventory Ledger) to Estimate
Lower of Cost or Market and/or Inventory Obsolescence
The inventory subledger (or subsidiary inventory ledger) details information on the inventory
held by the company, including the purchase and sale of the inventory held by the company.
The detailed balance of each inventory item , or SKU (stockkeeping unit), which supports the
total inventory balance in the overall general ledger and the balance sheet.
PROGRESS CHECK
6. What type of information does a fixed asset subledger have that a balance sheet would not have?
Financial Accounting-Related Data

Corporate Securities and Exchange Commission Filings (10-Ks, 10-
Qs, 8-Ks)
Publicly traded companies make required submissions to the Securities and Exchange
Commission each year. The SEC mandates information from companies trading on a public
exchange to ensure that the typical investor has all pertinent information he or she needs to
make an investment decision. While this information is provided to all investors, the SEC is
most interested in protecting the small, typically individual, investor. This required annual
submission required by the SEC is called form 10-K.
The 10-K has five required sections:
Business. An overview of the company’s main operations, including what products and
services it provides and how it makes money.
Risk Factors. Any significant risk the company faces currently or expects it will or could
face it in the future.
Selected Financial Data. Financial data highlights over the last five years.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(MD&A). Management explains its results from the most recent time period using their own
words. Unlike most of the rest of Form 10-K, which is structured data, this represents
unstructured data that may require additional work to extract and analyze.
Financial Statements and Supplemental Data. The company’s audited financial statements,
notes to the Financial Statements, and a report from the auditor explaining the results and
scope of their audit.
The related quarterly submission required by public firms to the SEC is called form 10-Q. It
is similar to form 10-K in many ways, but is more abbreviated in its required disclosures.
Another required submission to the SEC is form 8-K. An 8-K is used to notify investors
of important events or announcements that are required by the SEC not made in the ordinary
course of business. Form 8-Ks include information such as the appointment or departure of
senior officers, a material or substantial asset acquisition or sale, change in accountants (audit
firm), restatements of financial statements, etc.
The 10-K, the 10-Q, the 8-K and other required submissions are all stored at EDGAR
(https://www.sec.gov/edgar.shtml), the Electronic Data Gathering, Analysis, and Retrieval
system. The EDGAR system automatically collects, validates, indexes, and services as a
repository for all forms submitted to the SEC. An example of the types of items included in
the EDGAR repository for Apple is shown in Exhibit 2.4.
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EXHIBIT 2.4
Example of the SEC Filings for Apple Computer (as shown on EDGAR)
Source: U.S Securities and Exchange Commission (SEC)
Conference Call Transcripts–Website links

An earnings call is a conference call between company management [like a chief executive
officer (CEO) and chief financial officer (CFO)], analysts, investors and the media to discuss
earnings and other financial results that immediately precede the call. Analysts and investors
have an opportunity to ask management questions during the call to help them better
understand past sales and earnings reports and help predict future performance.
Seeking Alpha, (https://seekingalpha.com/), a website dedicated to curating content of
interest to investors; for example, offers transcripts of earnings calls as shown in Exhibit 2.5.
EXHIBIT 2.5
Example of Earnings Call Transcript
Source: Seeking Alpha
The transcripts are available for download and analysis. Some financial analysts and
accounting researchers perform textual analysis to evaluate the tone of management
responses to questions to learn about the general attitude of management toward the future
potential of the company. This would generally be considered to be unstructured data.
XBRL (eXtensible Business Reporting Language)

XBRL, which stands for eXtensible Business Reporting Language, is the computer-based
standard used to define and exchange financial information between disclosing companies
(like Apple and NetFlix) and financial statement users (like investors, regulators, lenders,
banks and bondholders), and other interested parties. XBRL requires that each number
submitted be accompanied by a tag from the XBRL library explaining exactly what that
number represents.
The SEC requires each publicly traded company to submit its financial statements using
XBRL. This gives the SEC a huge dataset of financial statement numbers that is available to
interested parties. To access the XBRL data, the user needs to input the ticker symbol, the
years or quarters he or she is interested in, the time period [quarterly or entire (or fiscal)
year], rounding (in $millions or $thousands, etc.), and the particular financial statement item
as an XBRL tag. An example of the use of XBRL requesting data for IBM’s Total Assets
(XBRL tag: Assets) and Liabilities (XBRL tag: Liabilities) from 2014 to 2017 is shown in
Exhibit 2.6.
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EXHIBIT 2.6
Example of the Use of XBRL Tags and the XBRL Data Retrieved
Source: IBM Financial Statements sourced via XBRL (using FinDynamics)
Press Releases
Companies often issue press releases to make an official statement to the media from the
company about a specific matter. Over time, these press releases can be aggregated into a
fairly comprehensive view of what is happening at a company, the tone of management
toward business opportunities, and future profitability, thus representing unstructured data
available for analysis.
PROGRESS CHECK
7. Compare and contrast the usefulness of the accounting documents stored at EDGAR and the financial
statement data items tagged within the XBRL database.
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Managerial Accounting Data

Managerial accounting data is information used for decision making by managers and leaders
within an organization, such as the CFO. While it has fewer rules or GAAP standards than
financial accounting data (in other words, it generally depends on specific company
information needs), it has essentially two criteria:
Create, maintain, and store information that is useful to internal stakeholders in making
decisions.
The cost of capturing, measuring and storing the data must be less than the value of the data.
There are many possible sources of managerial data. We discuss a few prominent sources of
managerial data in this chapter, recognizing there are many more resource possibilities.
Budget Data
Budgets serve as a financial plan for an upcoming month, quarter, or year and are used to
prioritize the needs of an organization. Budgets generally start with a prediction of the level
of sales the company expects will occur in a forthcoming time period. Once the estimated
level of sales is determined, the company then predicts the level of expenses (cost of goods
sold, advertising expense, sales expense, salaries, etc.) and capital expenditures (fixed assets
like factory, computers, and equipment) that will be needed to support those sales.
As the year progresses and actual outcomes (like sales and related expenses) are
happening (or are realized), it is often useful to compare the actual against the budget.
Comparing the actual to the budgeted amounts helps the company learn what occurred that
was both anticipated as well as unanticipated. Exhibit 2.7 provides an example of
performance report, comparing budget data to actual data.
EXHIBIT 2.7
Performance Report: Budget vs. Actuals for Pathway Gardens
Standard Cost Data

Tyson headquarters in Springdale, Arkansas, processes millions of chickens each week. The
company determined the standard cost per pound of chicken and knows how the changes in
feed costs, fuel costs, and electricity will affect its production costs and, ultimately, its
profits. Tyson monitors this standard cost of a pound of chicken on a continuous basis,
exhibiting high velocity.
By examining this data, decision makers can look at alternate sources of chicken feed if
the cost of feed changes too much. Likewise, should the price of electricity rise too far, they
can look for other means (methane, natural gas, etc.) for heating the feed houses.
Point-of-Sale Transaction Data
Point-of-sale (POS) transaction data creates a stream of data from every transaction that
occurs. Every sale recorded via a cash register at a Walmart, for example, is captured and
analyzed by suppliers. Walmart has a system called Retail Link, an internet-based tool
allowing suppliers to access the point-of-sale data. Retail Link provides sales and inventory
data—by item, store, and day—to its suppliers. That is, it contains record of every sale of
every individual item at every Walmart store, every hour of the day for the last 2 years. The
data is used to help suppliers predict buying patterns, trends, and inventory management.9
The thought is that if suppliers can better predict future demand for the product, they can
work with the supply chain (the process that goes from production to distribution to ultimate
sale of the product) to make sure that the right product is at the right place at the right time.
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Data on Potential Cost Drivers for Allocating Overhead
Managerial accounting introduced us to three types of costs:
Direct Labor.
Direct Material.
Overhead (indirect costs that support the making or selling of a product or service).
While direct labor and direct materials are directly traceable to each product or service
produced, the accounting for overhead requires additional work. Overhead is an increasingly
large source of indirect costs that need to be allocated to a product or service to better
understand the nature of the costs and product profitability. How would you allocate the costs
of factory electricity to a product if the factory makes many products? If we could figure out
which products were more machine-intensive, or took more space, or required page 62
more work, perhaps we could better allocate those costs to the product.
Activity-based costing (ABC) attempts to allocate indirect costs on the basis or activities
that drive them. Therefore, it is important to understand what drives overhead costs. Cost
drivers might include number of direct labor hours worked, number of customer calls
addressed, number of change orders, number of machine hours, number of product returns,
numbers of inspections, or number of orders received.
The more data the company has on these and other potential cost drivers, the better it can
allocate overhead costs to the individual products made.
Supply Chain Data

The supply chain represents the process of getting products from raw materials to production
to distribution to the ultimate delivery of the final product to the customer. The supply chain
will often contain many vendors who all work on various stages rather than from start to
finish.
A supply chain system might include information on active vendors (their contact info,
where payment should be made, how much should be paid), the orders made to date (how
much, when the orders are made), or demand schedules for what component of the final
product is needed when. As an auditing concern, for example, if the company does not keep
an active and approved vendor list, it is possible to erroneously or fraudulently send payment
to the wrong, or non-existent (fraudulent) vendor and potentially lose that money.
Customer Relationship Management Data

A customer relationship management (CRM) system is an information system for
overseeing all interactions with current and potential customers with the goal of improving
relationships. CRM systems contain every detail about the customer. CRM data may include
the following:
Customer contact history:
What happened in the interaction (what they asked about or what was decided)?
Any interest in new products or services?
Customer order history.
Customer level of trade discounts or payment terms.
Customer credit score (is their credit improving or declining?).
Customer credit limit (how much in credit sales are they allowed).
Customer payment history (any outstanding accounts receivables); how well (quickly) they
are paying their bills owed?
Imagine how having all of this data on each customer will help better predict allowance for
doubtful accounts by identifying accounts receivable we expect to collect versus those that
may be at risk.
Human Resource Data

Companies also have a set of data about what is arguably their most valuable asset: their
employees. A human resource management system (HRMS) is an information system for
managing all interactions with current and potential employees, including:
Recruiting data and leads
Employee training (current and desired certifications)
Payroll and compensation (including tax elections like 401k contributions, number of
dependents, amount of state and federal withholding, etc.)
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Employee benefits (stock options, bonuses, health insurance, etc.)

Annual reviews (prior and current year reviews, rating received)
Absenteeism (how often work missed)
Career progression (prior and current roles)
Employee satisfaction and sentiment
Human resource management systems represent a rich data set for accountants to consider.
Evaluating and monitoring HR data points may lead to identifying mistakes or alerting
managers to potential acts of fraud. For example, depending on the size of the organization, it
is possible that an analysis of the salaries data might uncover an individual being paid that no
longer works for the company.
Tax Data
Accountants are deeply interested in the impact of transactions and events on the amount of
tax that is due and payable. The tax information comes from transactional data gathered in
the financial reporting system. Since the tax function generally does not generate their own
data, two examples of tax data that needs to be stored are:
Depreciation expense: Depreciation expense is deducted from income to arrive at taxable
income. However, because the depreciation method used for tax purposes is different from
the depreciation method for financial accounting purposes, the depreciation for tax purposes
needs to be stored as a separate data item.
R&D tax credit. The Internal Revenue Service allows companies to receive a tax credit for
their research and development (R&D) costs. To receive this credit, firms must document an
appropriate level of detail before receiving R&D tax credit, linking an employee’s time
directly to a research activity or the use of specific equipment. Firms keep the needed detail
(timesheets, calendars, project timelines, document meetings between various employees,
time needed for management review, etc.) to qualify for the R&D tax credit.
PROGRESS CHECK
8. How might point-of-sale data be used by companies hoping to have the right product available at the right
time at the right price for the customer?
Nonaccounting Data
LO 2-5
Explain how nonaccounting data
can enhance accounting.
There are a great number of useful nonaccounting data that accountants use to answer
accounting questions, including:
Economic data.
Current and historical stock prices.
Social media.
Analyst research reports and earnings forecasts.
Some of the non-accounting data will help us with better understanding of our accounting
data. For example, accounting includes numerous estimates (Allowance for Doubtful
Accounts, Inventory, Goodwill, etc.) that nonaccounting data can help make more accurate.
Economic data and analysis reports help accountants make better, more accurate budgets and
forecasts of earnings.
We describe more specifically how the nonaccounting data helps accounting in the
following sections.
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Economic Data
Accountants sometimes use macroeconomic data, such as:
Gross domestic product (GDP)—as a measure of economy-wide performance.
Unemployment numbers—as a measure of labor availability.
Consumer Price Index (CPI)—as a measure of inflation.
Housing market starts and price levels—generally regarded as a key measure of economic
status.
Macroeconomic data is generally useful for diagnostic and predictive analytics, which
will be covered in Chapters 7 and 8. For example, company profitability might be considered
a function of how well the overall economy is performing. Labor availability might help us
predict how much labor will cost us in the future. Having access to basic macroeconomic
data for the countries where the company is doing business is an important part of the
accountant data toolkit!
Current and Historical Stock Prices

Current and historical daily stock price data is readily available on websites like Yahoo!
Finance (https://finance.yahoo.com/), as shown in Exhibit 2.8. By clicking on “Historical
Data” and inputting the appropriate time period, it is easy to access daily stock prices for any
publicly traded firm.
EXHIBIT 2.8
Historical Stock Prices from Yahoo! Finance Website
Source: Yahoo! Finance/Verizon Media
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Social Media
Investing Chat Websites—StockTwits, Twitter
Social media and the internet have several ways for potential investors to communicate with
each other. Investors like to share their opinions or hype their stock. This can occur on blog
sites and chat boards (like on Yahoo! Finance) or on Twitter or StockTwits.
Exhibit 2.9 provides an example of the discussion on an investing social media site
named StockTwits. StockTwits organizes its discussion using a cashtag which is a “$” sign
plus the ticker symbol. So for Netflix, the cashtag would be $NFLX. Note that any discussion
that includes the cash tag $NFLX will be summarized on the NFLX StockTwits page.
EXHIBIT 2.9
Stocktwits Discussion for Netflix (Cashtag = $NFLX)
Source: StockTwits, Inc.
Sometimes data analysts employ computer programs (sometimes called machine

learning) to assess the sentiment on chat sites to see how it is related to stock price.10
Financial dictionaries such as that derived by researchers such as Loughran and McDonald11
define positive and negative words. The machine learning techniques sometimes count how
many positive words are said by those on StocktTwits as compared to the number of negative
words to assess the overall sentiment reflected in the post. There are increasingly more
sophisticated techniques employed to understand the overall sentiment of the various blog
posts.
VERN’S INSIGHTS
When I served on the board of directors at a publicly traded company, I would often monitor chat boards to
read what investors were communicating about the direction of the company. This gave me a good feel for the
concerns they expressed and sometimes gave us as directors incentive to disclose some clarifying
information more fully in an official way.
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General Chat Sites (Amazon)—Tide Pods
Some information is available on various chat sites that help answer accounting questions.
For example, by looking at the reviews, Amazon can tell how well Tide Pods are selling and
if the product is pleasing customers. Product reviews may help the product manufacturer (in
the case of Tide Pods, shown in Exhibit 2.10, Procter & Gamble) predict the level of sales or
profitability from that product or brand. In the example shown in Exhibit 2.11, the data
analyst may be able to correlate the customer review score for Tide Pods of 4.5 out of 5 Stars
(or 90% total above average reviews) to increased sales of Tide Pods. If the customer reviews
were below average, the analyst may predict a downward trend in sales. The data analyst
may focus on the most positive or the most negative reviews to get an idea of what customers
are saying. They may also consider the reviews for competing products to see where they
might be vulnerable.
EXHIBIT 2.10
Tide Pods as Advertised on Amazon
Source: Amazon.com, Inc
Exhibit 2.11 provides a product page with related reviews for Tide Pods.
EXHIBIT 2.11
Amazon’s Product Review for Tide Pods
Source: Amazon.com, Inc
With broad and generally free availability of product reviews for a company’s and its
competitor’s products, it is a potential source of data for the accountant.
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Analyst Research Reports and Earnings Forecasts
Financial analysts often prepare research reports talking about company prospects. Analysts
synthesize financial statements, listen to conference calls, and talk to managers of the
company and to its competitors to prepare a research report. Generally, as a result of the
report, the analyst will give an opinion on whether to buy, hold, or sell a stock. These reports
provide a rich set of data, offering a professional, sophisticated view of company prospects
that can be useful to accountants. Exhibit 2.12 provides an example of Value Line’s Financial
Analyst Report for Johnson & Johnson.
EXHIBIT 2.12
Value Line Financial Analyst Report for Johnson & Johnson
Source: Value Line, Inc
PROGRESS CHECK
9. How are financial analyst reports and chat sites like StockTwits similar? Why would a company be interested
in reading them?
10. How are reading product reviews useful for predicting earnings performance?
SOME EXCEL BASICS: THE PIVOTTABLE
LO 2-6
Describe some basics of
analyzing accounting data.
LAB CONNECTION
In this text, we will use Excel and Tableau exclusively. Chapter 1 Appendix A covers the Excel basics and
introduces PivotTables, which is also covered in Lab 1-1. In this chapter, we jump further into using
PivotTables.
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PivotTables are a tool that allows reorganization and summarization of certain data using
cross-tabulations without changing the underlying spreadsheet (or data). You’ll be amazed
how useful PivotTables are for accountants and data analysts. We’ll give a number of
examples in labs in this book. The example below demonstrates using Excel’s version of the
PivotTable tool for computing month-over-month changes. Specifically, we summarize
corporate sales by month and compute the percentage of monthly change using PivotTables
in Excel.
Our first task is to summarize corporate sales. Download the file named “2.1 Monthly
Sales.xlsx.”Look over the data in the base tab, noting several sales totals per day throughout
the year (as shown in Exhibit 2.13).
EXHIBIT 2.13
We first need to summarize those sales. To do so, we will insert a PivotTable. To do so,
click on Insert and then click on PivotTable (as shown in Exhibit 2.14).
EXHIBIT 2.14
Next we need to insert the Range of Data to be included in the dataset. Insert the range
“Base!$A$1:$D$984” into the Table/Range box as shown below or highlight these cells with
your cursor. Also, select “New Worksheet” as the location where we want the PivotTable to
be placed and then select OK (as shown in Exhibit 2.15).
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EXHIBIT 2.15
We’ll now start to build the PivotTable. First click on the PivotTable and a PivotTable
dialog box will open.
Within the PivotTable Fields window, click and drag the word “Month” to Rows. Click
and drag the word “Sales” to ΣValues two times as follows. Your spreadsheet should look like
that shown in Exhibit 2.16.
EXHIBIT 2.16
We’d like the third column labeled “Sum of Sales2” to be where we compute the month-
over-month calculation. To do so, click on “Sum of Sales2” in the Values Box of the
PivotTable, and select Value Field Settings (as shown in Exhibit 2.17).
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EXHIBIT 2.17
As shown in Exhibit 2.18, within Value Settings, change the Custom name to “%
Change.” Then Select the “Show Values As” tab by clicking on it. Then Show Values As,
click the drop-down menu, and select “% Difference From.” Choose “Month” for the Base
field. And for Base item, choose “(previous).”
EXHIBIT 2.18
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Click Ok. The resulting PivotTable will look like Exhibit 2.19.
EXHIBIT 2.19
Let’s do one last step to format the sales numbers. Highlight the column of sales, right-
click and select “Format Cells,” and format them as currency with no decimal places to give
this final product shown in Exhibit 2.20.
EXHIBIT 2.20
PROGRESS CHECK
11. The previous example summarized sales by month. How would you summarize sales by the region where
the sale took place (labeled as regions 1 through 4)?
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Summary
Accountants have access to a rich set of both structured and unstructured data, some of
which they generate themselves through their financial reporting systems and other
internal systems (e.g., cost accounting, supply chain, and customer relationship
management systems), and some of which they get from external sources. As
accountants become more familiar with the data available to them, they are better able
to opine on the data that might be available to address decision makers’ needs.
Key Words
10-K (57) A required annual submission to the Securities and Exchange Commission reporting a company’s
financial performance.
10-Q (57) A required quarterly (every 3 months) submission to the Securities and Exchange Commission reporting a
company’s financial performance.
8-K (57) A required submission to the Securities and Exchange Commission that is used to notify investors of
important events or announcements.
Accounting Data Analytics (50) The technologies, systems, practices, methodologies, databases, statistics, and
applications used to analyze diverse accounting and nonaccounting data to give organizations the information they
need to make sound and timely business decisions.
audit (50) An assessment of the accounting principles used and significant estimates made; it evaluates the overall
financial statement presentation.
Big Data (51) Datasets that are too large and complex for businesses’ existing systems (traditional capabilities) to
capture, store, manage, and analyze.
budgets (60) Financial plan used to prioritize the needs of an organization for an upcoming time period.
customer relationship management (CRM) system (62) An information system for managing all interactions with
current and potential customers.
Data Analytics (50) The technologies, systems, practices, methodologies, databases, statistics, and applications used
to give organizations the information they need to make sound and timely business decisions.
earnings call (58) A conference call between company management (like a CEO and CFO), analysts, investors, and
the media to discuss earnings and other financial results that generally precede the call.
EDGAR (57) The Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. The EDGAR system
automatically collects, validates, and indexes, and serves as a repository for all forms submitted to the Securities and
Exchange Commission.
financial accounting data (54) Any information external decision makers, such as stockholders, banks, and
suppliers, might use to help make decisions.
financial statements (54) A collection of reports that communicate a company’s financial results, financial
condition, financial health and its cash flows.
fixed assets (56) Property, plant (factories, office buildings, stores, etc.), and equipment (vehicles, fork lifts,
computers, machinery, power tools, technical apparatus, etc.).
general ledger (55) Provides the current balance of all asset, liability, equity, revenue, and expense accounts,
summarizing all of the company’s transactions
human resource management system (HRMS) (62) An information system for managing all interactions with
current and potential employees.
PivotTable (57, 68) A tool that allows reorganization and summarization of certain data using crosstabulations
without changing the underlying spreadsheet (or data).
press release (69) An official statement to the media from the company about a specific matter.
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Securities and Exchange Commission (SEC) (54) U.S. government agency charged with protecting investors by
requiring full and truthful financial disclosure by companies.
semi-structured data (53) Data without internal organization or structure but that has tags explaining what the data
represents.
special journal (55) An accounting journal where similar transactions can be recorded. For example, a sales journal
records all sales for a company.
structured data (52) Highly organized data that fits nicely in a table or in a database. An excel spreadsheet, or a
balance sheet or income statement is a good example.
subsidiary ledger (56) An accounting ledger that details information on specific accounts with common
characteristics. Each subsidiary ledger is associated with one and only one general ledger (G/L) account.
unstructured data (52) Data without internal organization (or structure). Blogs and social media and pictures
posted in Instagram would both be examples of unstructured data.
veracity (53) The underlying quality of the data, as to whether the data is true or accurate or clean and is worthy of
trust.
XBRL (eXtensible Business Reporting Language) (58) The computer-based standard used to define and exchange
financial information from financial statements between financial statement preparers (like Nike and NetFlix) and
financial statement users [like investors, regulators, lenders (banks and bondholders)] and other interested parties.
ANSWERS TO PROGRESS CHECKS

1. Getting data from various and diverse sources helps us learn more about the underlying causes and
consequences of accounting information. Social media, business press, financial statements, analyst
reports, and so forth, all help provide the decision maker with the needed information to make
judgments and make decisions. Reading product reviews for a product a company manufactures and
sells will help the company assess its popularity and assess how well the company is doing at
marketing the product.
2. You could compare sales trends of the current iPhone to previous versions of the iPhone. You could
compare sales trends of the current iPhone to its competitors (Samsung Galaxy, etc.). You could
read the business press and product reviews to see how well received the iPhone is. All of this data
will help you predict the current trend and explain why it is or is not selling as it should be.
3. The question needs to drive the analysis, not the availability of data. Managers and decision makers
ask the questions whose answers will assist them to manage the business. To do so, they will follow
the AMPS model: First ask the question, then find the data to help them answer the question,
perform the analysis, and finally, share the story with decision makers. If the data are not available,
the question may have to be changed to answer what is possible with data.
4. Amazon—Using the four Vs describing Big Data, we evaluate the balance sheet as follows:
a. The volume of the balance sheet is not high; it is fairly concise in listing account names and
balances.
b. The variety of the balance sheet data is structured because it fits neatly within a table.
c. The velocity is of slow-to-medium frequency because it comes out four times a year. While stock
prices come out every microsecond, four times a year isn’t near as frequent.
d. The veracity is always up for debate. Publicly traded companies are required to have an annual
audit by an outside (or external) auditor, but there is always the chance that error or fraud has
occurred.
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5. Twitter is not usually at the same level of veracity because tweeters are not generally scrutinized for
their truthful claims because they are generally expressing their opinion. News broadcasts can be
subject to bias and error as can data from the balance sheet. The biggest thing that would possibly
make a balance sheet have more veracity is that it is audited by an independent, outside auditor who
works to reduce the chance that inaccuracy persists.
6. A fixed assets subledger has data on plants (e.g., factories, office buildings, stores, etc.) and
equipment (e.g., vehicles, fork lifts, computers, machinery, power tools, technical apparatus, etc.)
that underlies the general ledger balance of Fixed Assets—dates of purchase, depreciation method,
accumulated depreciation taken to date for both book and tax purposes, betterments, and ultimate
disposition. The balance sheet would just have the combined total net of depreciation.
7. EDGAR serves as a repository for submissions required by the SEC. XBRL is also required by the
SEC. Whereas EDGAR is a copy of the physical documents, XBRL requires tags for each number in
the financial statements and footnotes to be able to effortlessly exchange the data between financial
statement preparer and financial statement user.
8. Point-of-sale data gives remarkable detail of what was sold, in what quantity, in what store, and on
what date (and time). To the extent that the past predicts the future, having this detail will help the
company have what it needs for subsequent sales.
9. An analyst report might be considered the point of view of a professional investor. A chat site like
StockTwits might reflect the point of view of a nonprofessional investor. To the extent that a
company’s stock is purchased by both professional and nonprofessional investors, the company
would be interested in what both groups are saying about them.
10. Understanding how well a product is received by the market will help predict financial performance.
In general, the better the reviews, the better the expected financial performance for that product.
11. If you include Region in the columns of the PivotTable, company sales will be summarized by region.
Multiple Choice Questions

1. (LO 2-4) What would be most likely to be disclosed in an 8-K filing to the SEC?
a. Financial statements
b. Change in auditor
c. Management discussion and analysis
d. Overview of a company’s main operations
2. (LO 2-4) What is the computer-based standard used to define and exchange financial information
from financial statements preparers to financial statement users?
a. SEC EDGAR
b. XBRL
c. Earnings call
d. Customer relationship management
3. (LO 2-5) Which system would be used to manage the hiring process for all potential employees?
a. Human Resource Management System
b. Customer Relationship Management System
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c. Supply Chain System
d. Financial Reporting System
4. (LO 2-4) The biggest difference between a 10-K and a 10-Q is the _____ disclosure.
a. frequency of
b. agency that receives the
c. financial statements included in the
d. company providing the
5. (LO 2-5) The chapter suggested that _____ be used to help evaluate inventory obsolescence and
the lower of cost or net realizable value of inventory.
a. product reviews
b. inventory counts
c. structured data
d. supply chain data
6. (LO 2-3) Whereas _____ would generally be considered to structured data, _____ would generally
be considered to be unstructured data.
a. financial statements; product reviews
b. product reviews; financial statements
c. Instagram pictures; product reviews
d. geographic images; firm budget
7. (LO 2-3) If there were fake news presented by someone trying to sway an opinion (or a vote), that
would bring into question which aspect of Big Data?
a. Volume
b. Veracity
c. Velocity
d. Variety
8. (LO 2-4) An announcement of a new CEO would most likely be reported on which SEC form?
a. 10-K
b. 10-Q
c. 8-K
d. S-1
9. (LO 2-2; LO 2-4) There are really very few opportunities to have a question-and-answer session with
the CEO of a company and have it recorded for others to use. However, _____ of such an interactive
question-and-answer session that is fairly widely available to all interested parties.
a. the management discussion and analysis as part of the 10-K
b. conference call transcripts
c. press releases
d. SEC form 8-K
10. (LO 2-4) A business report that allows an easy, automated exchange between a financial statement
repository and a financial statement user is possible using _____ .
a. XBRL
b. XML
c. Excel
d. Google financials
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Discussion Questions
1. (LO 2-1) Let’s say you have a strategy to book a flight on dates that a flight is oversold. (Oftentimes
when a flight is oversold, you can get a free $700 voucher, allowing you to potentially get vouchers
for free subsequent travel!) If you could have any data available for your analysis, what data would
you use to see if a flight from New York to Miami is frequently oversold? What all would you check to
help in this prediction?
2. (LO 2-3) How would you rate the velocity of stock price data on the New York Stock Exchange
versus an income statement issued quarterly? What are the trade-offs in data generated more
frequently and that data generated less frequently?
3. (LO 2-3) Why would the balance sheet be considered structured data, whereas product reviews
would be considered to be unstructured data?
4. (LO 2-3) Which would have greater veracity, an annual report or a blog post? Why?
5. (LO 2-3) Which would have greater variety, a set of Instagram posts or a spreadsheet of employee
data? Why?
6. (LO 2-4) Form 10-K, an annual submission to the Securities and Exchange Commission, requires
management to explain its results from the most recent time period using their own words. Why
would this be valuable data for a data analyst? How would a data analyst use this data?
7. (LO 2-4) How would a comparison of budgeted and actual data be useful to a data analyst?
8. (LO 2-4, LO 2-5) How would a data analyst evaluate a conference call to get a feel for the sentiment
of management?
9. (LO 2-5) How would a company use the human resource management system data to evaluate
employee turnover?
10. (LO 2-5) How would a company use customer relationship management data to evaluate whether a
customer is able to pay back the receivables owed the company?
11. (LO 2-5) How would a company use supply chain data to evaluate whether a fraudulent vendor was
set up?
12. (LO 2-5) How would point-of-sale data be useful to a vendor?
Brief Exercises
1. (LO 2-4) Match the accounting data term to the definition provided.
Accounting
Definition
Data Term
8-K Plant (factories, office buildings, stores,
etc.) and equipment (vehicles, fork lifts,
computers, machinery, power tools,
technical apparatus).
Accounting Automatically collects, validates,
data indexes and services as a repository
analytics for all forms submitted to the Securities
and Exchange Commission.
Fixed A required submission to the Securities
Assets and Exchange Commission that is
used to notify investors of important
events or announcements that either
the SEC or shareholders might be
interested in receiving.
EDGAR The technologies, systems, practices,
methodologies, databases, statistics,
and applications used to analyze
diverse accounting and nonaccounting
data to give organizations the
information they need to make sound
and timely business decisions.
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2. (LO2-4, LO 2-5) Match the accounting data terms to the example of that data.
Example of Data
Customer order history
Employee salary history
Vendor ID and address
Form 8-K
IBM’s Accounts Receivable in 2021
Accounting Data Term

XBRL
SEC EDGAR
Supply Chain System
Human Resource Management System
Customer Relationship Management System
3. (LO 2-3) Match the data characteristic one of the Four Vs of Big Data (velocity, variety, volume,
veracity).
Data Characteristic Big Vs of Big Data

Speed of generation
Unstructured data
Uncleaned data
Sheer size of data
Untrusted data
Semi-structured data
Rate of analysis
4. (LO 2-4, LO 2-5) Match the data source to the data provided.
Data Provided Data Source

How many bananas sold in what Financial
location analyst
forecast
How many days employee 313 Point-of-sale
missed work last year terminal/data
CEO and CFO comments made on Fixed asset
recent earnings performance subledger
Details on Accumulated Earnings
Depreciation taken to date for tax Conference
purposes Call
Financial statement data Budget data
Company prediction of future sales Financial
performance analyst
forecast
External party prediction of future SEC EDGAR
earnings or Yahoo!
Finance
Problems
1. (LO 2-6) Summarize monthly sales and compute the % Change from one month to the next (as
shown in the chapter).
Required:
1. Download the file “Problem 2-1.xls.”

2. Use a PivotTable to sum monthly sales.
a. Capture a screenshot and label it 2-1.1.
b. What is the August monthly sales?
c. What is the December monthly sales?
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3. Modify the Value Field Settings (as shown in the chapter) and calculate the % change from one
month as compared to the previous month.
b. What is the percentage change in monthly sales from June to July (round to 2 decimal
points)?
c. What is the percentage change in monthly sales from November to December (round to 2
decimal points)?
2. (LO 2-6) Summarize sales by month, by sales region (regions 1-4), and by both month and region.
Required:
1. Download the file “Problem 2-2.xls.”

2. Use a PivotTable to sum sales by month.
b. What are the January monthly sales?
c. What are the February monthly sales?
3. Use a PivotTable to sum sales by region.
b. What are the total sales for region 2?
c. What are the total sales for region 4?
4. Use a PivotTable to sum sales by both month and region. (Hint: In the PivotTable, put month in
the rows and region in the columns.)
b. What are the December sales for region 1?
c. What are the April sales for region 4?
3. (LO 2-4) Go to SEC EDGAR (https://www.sec.gov/edgar/searchedgar/companysearch.html) and
download the 2017 10-K (dated 02-27-2018) for IBM (Ticker Symbol = IBM). Enter File Type as “10-
K”
Required:
1. Take a screen shot of the first page of the 10-K and label it 2-3.jpg.
2. Within the 10-K, you’ll find Virginia M. Rometty is chair of the Board at IBM. She has been an
officer since what date?
3. By clicking on the Interactive Data link, you can gain access to the financial statements.
a. What is the net income for 2017 in $ millions?
b. What is the total assets for 2017 in $ millions?
4. (LO 2-4, LO 2-5) Go to Yahoo! Finance (https://finance.yahoo.com/) and search the symbol for the
NASDAQ Composite (∧|X|C). Click on Historical Data, and find the close price between November
8, 2017, and November 7, 2018.
Required:
1. Take a screen shot of the first page and label it 2-4.jpg.

2. What was the adjusted close price for the NASDAQ Composite on November 8, 2017?
3. What was the adjusted close price for the NASDAQ Composite on November 7, 2018?
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LABS ASSOCIATED WITH CHAPTER 2
LAB 2-1 Accounts Receivable Summary by Customer (Excel)

LAB 2-2 Accounts Receivable Summary by Customer (Tableau)
LAB 2-3 Inventory Management by Customer Profitability (Excel)
LAB 2-4 Inventory Management by Customer Profitability (Tableau)
LAB 2-5 Inventory Management by SKU Profitability (Excel)
LAB 2-6 Inventory Management by SKU Profitability (Tableau)
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 2-1 Accounts Receivable Summary by

Customer (Excel)
Keywords
managerial accounting, PivotTable, accounts receivable
Lab Insight
A key part of managing a company is to be able to compute customer profitability.
Required:
1. Summarize the unpaid invoices (accounts receivable) by customer. Show the PivotTable for the first 20 lines.
2. Get the detailed receivables for the customer “eBay.”
Ask the Question

How can we use PivotTables on the total detailed accounts receivables balance to get
specific detail on invoices due by customer?
Master the Data

Open Excel File Lab 2-1 Data.xlsx.
To begin, we have a list of 200 receivables on specific invoices that are all past
their due date as of today’s date of 12/31/2021. This is shown in the Excel file Lab
2-1 Data.xlsx. Here’s the data dictionary.
Data Dictionary
Customer Name: Customer Name
Invoice Amount: Invoice Amount
Due Date: Date that payment is due
Perform the Analysis

Step 1
The use of PivotTables in Excel allows for an easy way to figure out how many days
past due the accounts receivable are. We start by calculating the days past due by
taking today’s date and subtracting the invoice due date, as shown in Exhibit 2.21.
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EXHIBIT 2.21
In cell D1, type the title “Days Past Due.”

In cell D2, insert the equation “=$G$1-C2”. Note when we input the equation for
“Days Past Due,” select <F4> (or input with dollar signs so it appears as “$G$1”) to
make the reference to today’s date an absolute reference to keep referring to today’s
date of 12/31/2021 (in this case).
We then copy this formula all the way to the bottom (Exhibit 2.22).
EXHIBIT 2.22
Once we have completed this, we are ready for PivotTables. First thing we need
to do is turn the spreadsheet into a table. We do this by selecting one cell within the
spreadsheet range and selecting <Ctrl>-T (or <Command>-T for Macs), as shown in
Exhibit 2.23.
EXHIBIT 2.23
Then click OK.
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Step 2
To get started on a PivotTable, we go to the Table Tools—Design menu (as shown in

Exhibit 2.24).
EXHIBIT 2.24
Select “Summarize with PivotTables” (as shown in Exhibit 2.25).

EXHIBIT 2.25
And select “Table1” for the Table/Range and click OK.

Step 3
We are trying to sort and summarize the accounts receivable owed by customer.
Inputs into PivotTable

Columns:
Rows: [Customer]
ΣValues: [Invoice Amount]
We are trying to sort and summarize the accounts receivable by the number of days
past due. To do so, Drag [Customer] from PivotTable Fields into the Rows and
[Invoice Amount] into ΣValues fields in the PivotTable. By right clicking on Invoice
Amount, select the Value Field Settings and make sure we select SUM by invoice
amount (as shown in Exhibit 2.26). Click OK.
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EXHIBIT 2.26
This gives us the total invoice amount by customer.

Step 4
We next work on formatting the PivotTable.
To do so, double click the “Row Labels” heading and rename “Row Labels” as
“Customer.” Also rename “Sum of Invoice Amount” by double clicking on that Cell
and typing “Total Amount Due.”
Optional step: We could also format the numbers as Currency by highlighting
the numbers and right click and select “Number Format” and selecting “Currency”
with 2 decimal places (as shown in Exhibit 2.27).
EXHIBIT 2.27
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Step 5
The objective of the assignment is to get the detailed past-due invoices by customer.
To get the detailed invoices for Audi, for example, double click on its amount due of
$2,198.22, to get the detailed invoices for Audi as shown in Exhibit 2.28.
EXHIBIT 2.28
We could do the same for any of the customers, including eBay.
Share the Story

Now that we have the detail by customer, we can better follow up with them to help
with collections. All employees interfacing with the client should have this detail
when they talk and interact with that specific customer.
Assessment:
1. Take a screenshot of the top 20 rows listing the total amount due by customer (from the PivotTable), and
label it “Lab 2-1 Submission 1.jpg.”
2. Take a screenshot of eBay’s invoices due, and label it “Lab 2-1 Submission 2.jpg.”
3. Answer the multiple choice questions in Connect.
Lab 2-1 Alternate

Apply the same steps as Lab 2-1 to the Lab 2-1 Alt Data.xlsx dataset. Open Excel
File Lab 2-1 Alt Data.xlsx.
Required:
1. Summarize the late accounts receivable by customer. Show the PivotTable.
2. Get the detailed receivables for the customer “Thai Tap.”
Assessment:
1. Take a screenshot of the top 20 rows listing the total amount due by customer (from the PivotTable), and
label it “Lab 2-1 Alt Submission 1.jpg.”
2. Take a screenshot of Thai Tap invoices due, and label it “Lab 2-1 Alt Submission 2.jpg.”
page 84
Lab 2-2 Accounts Receivable Summary by

Customer (Tableau)
Keywords
managerial accounting, PivotTable, accounts receivable
Lab Insight
A key part of managing a company is to be able to compute customer profitability.
Required:
1. Create a calculated field to show the numbers of days each invoice is past due.
2. Create a summary table that shows the total amount each company owes.
3. Create a filtered view to show the detailed information for each company.
Ask the Question

How can we use Tableau on the total detailed late accounts receivables balance to
get specific detail on invoices due by customer?
Master the Data

Open Tableau.
To begin, we have a list of 200 receivables that are all past their due date as of
today’s date of 12/31/2021. This is shown in the Excel file Lab 2-2 Data.xlsx. Here’s
the data dictionary.
Data Dictionary
Customer Name: Customer Name
Invoice Amount: Invoice Amount
Due Date: Date that payment is due
Step 1
Connect Tableau to the Excel file. From Tableau, select “Connect > Microsoft
Excel,” then browse to the location where you have saved file Lab 2-2 Data.xlsx,
and click Open (as shown in Exhibit 2.29).
EXHIBIT 2.29
©Tableau Software, Inc. All rights reserved.
page 85
Step 2
The data will likely come in with extra fields due to the way the spreadsheet is
formatted. To quickly clean the data, place a checkmark in the Use Data
Interpreter box (as shown in Exhibit 2.30).
EXHIBIT 2.30
The data should now consist of only these three fields (as shown in Exhibit 2.31).
EXHIBIT 2.31
Step 3
Click Sheet 1 to begin working with the data (as shown in Exhibit 2.32).
EXHIBIT 2.32
page 86
Step 4
Right-click in the Measures area to create Calculated Field (as shown in Exhibit
2.33).
EXHIBIT 2.33
Name your new calculated field Days Past Due.

To create the field, we will use the Tableau function DATEDIFF. The parameters
in the DATEDIFF function are the following:
Date_part—This parameter designates what Tableau should count, days, weeks,
years, etc. We will count days, so you can type “day” as the first parameter.
Start_date—We need to subtract today’s date (December 31, 2021) from the day
each invoice was due. This parameter needs to reference the Due Date field.
End_dat—This parameter is today’s date. Tableau formats dates in between number
signs like this: #2021-12-31#.
The formula as a whole should read like this: DATEDIFF(’day’,[Due Date],#2021-
12-31#)
Once you have input your information, click OK to finish creating the measure
(as shown in Exhibit 2.34).
EXHIBIT 2.34
KATIE’S DATA TIP!

If you wanted to monitor this dataset daily or weekly, you could replace the hard-coded date in the
End_date parameter with Tableau’s TODAY function. With that replacement, every time the file was
opened, the DATEDIFF function would recalculate the amount of days the invoices are past due
based on the actual current date.
page 87
That function would look like this: DATEDIFF(’day’,[Due Date],TODAY())
While data can’t be stored in Tableau it can maintain a live connection to where the data lives
(whether in Excel, a relational database, or elsewhere). So, you would only need to refresh the
data feed in Tableau when you open the file for the data to be updated with new accounts
receivable information and a newly calculated “Days Past Due” field to reflect the current day!

Step 1
Now that we have created our calculated field, we can build a table that replicates
the PivotTable you made in the previous lab.
Double-click Customer to see a Customer list, then double click Invoice Amount
to see the total sum of invoices each Customer owes (as shown in Exhibit 2.35).
EXHIBIT 2.35
To view the underlying data of individual customers, click on the customer name
and select the View Data icon (as shown in Exhibit 2.36).
EXHIBIT 2.36
page 88
From the window that pops up, you can select the tab for Full Data to see the
invoice details (as shown in Exhibit 2.37).
EXHIBIT 2.37
Assessment:
1. Take a screenshot of the top 20 rows listing the total amount due by customer and label it “Lab 2-2
Submission 1 Tableau.jpg”.
2. Take a screenshot of eBay’s invoices due, and label it “Lab 2-2 Submission 2 Tableau.jpg”.
Lab 2-2 Alternate

Apply the same steps as Lab 2-2 Tableau to the Lab 2-2 Alt Data.xlsx dataset. Open
Tableau, and connect to Excel File Lab 2-2 Alt Data.xlsx.
Required:
1. Create a calculated field to calculate the Days Past Due for each invoice.
2. Summarize the accounts receivable by customer.
3. Get the detailed receivables for the customer “Taste of Thai.”
Assessment:
1. Take a screenshot of the rows listing the total amount due by customer, and label it “Lab 2-2 Alt Submission
1 Tableau.jpg.”
2. Take a screenshot of Taste of Thai’s invoices due, and label it “Lab 2-2 Alt Submission 2 Tableau.jpg.”
page 89
Lab 2-3 Inventory Management by Customer

Profitability (Excel)
Keywords
customer profitability, inventory management, customer relationship
management
Lab Insight
Merchandising companies sell product to customers. They make money by selling
the product for more than the cost of the product. In this lab, we compute the gross
margin and then determine the most profitable customers. By highlighting the most
profitable customers, the merchandising company can focus its efforts on selling
more product to those customers that help it make more profits. This lab uses
PivotTables discussed and shown in earlier labs (Lab 1-1, 2-1, and 2-2).
Required:
Calculate gross margin (revenues less cost of goods/products sold) by customer.
Ask the Question

Which customers are the most profitable?
Master the Data

Fruitopia sells exotic fruit from throughout the world to customers throughout the
country by mail order. The company keeps a sales journal that records each sale and
its related sales and cost details. This sales journal is for March 1–4, 2021.
Data Dictionary
Invoice #: Invoice number for each sale of fruit
Customer #: Customer number making purchase
Zip Code: Zip Code of customer making purchase
Date of Sale: Date of Invoice
SKU: Fruitopia’s SKU (unique code for each fruit product sold)
Description: Description of each fruit sold
Quantity (Pounds): Weight of each product sold
Sales: Total sales price of product sold
Cost: Total cost of product sold

Open Excel File Lab 2-3 Data.xlsx.
Exhibit 2.38 shows a snippet of the spreadsheet.
page 90
EXHIBIT 2.38
Step 1
We first need to compute the gross margin of each sale.

We’ll start by going to cell J1, typing the title, “Gross Margin,” and inserting a
bottom border. In cell J2, we’ll compute the gross margin on each line item sold. To
do so, we must subtract the cost in cell I2 from the sales in cell H2 by typing the
formula “=H2-I2”; then hit enter (as shown in Exhibit 2.39).
EXHIBIT 2.39
We’ll then copy that formula down for every sale below from cell J3:J194.
Step 2
Our objective is to know the profitability of each customer. To have the necessary
information to assess this, we need to compute the gross margin for each customer.
To do so, we will use a PivotTable.
In menu, select Insert> PivotTable to open the dialog box (as shown in Exhibit
2.40).
EXHIBIT 2.40
page 91
In the dialog box, select the Table/Range that includes the account titles and all
of the data ($A$1:$J$194); select “New Worksheet,” then click OK. The empty
PivotTable will open up in a new worksheet, ready for Step 2.
Inputs into PivotTable

Columns:
Rows: [Customer #]
ΣValues: [Gross Margin]
Drag [Customer #] from PivotTable Fields into the Rows and [Gross Margin]
from PivotTable Fields into ΣValues fields in the PivotTable. The ΣValues will
default to “Sum of Gross Margin” (as shown in Exhibit 2.41).
EXHIBIT 2.41
(Optional Step) Highlight Cell A3 and insert the title “Customer Number.”
Step 3
Our last step is to sort Gross Margin from highest to lowest to find the most
profitable customer. To do, we select one of the numbers in column B and select
Data > Sort. Select descending, to get the most profitable customers on top (as
shown in Exhibit 2.42).
page 92
EXHIBIT 2.42
Share the Story

We can share the story by reporting our findings of our most profitable customers to
the sales department and to management. Potentially, we could send additional
advertising emails to them, enhance the customer service toward them, or give them
discounts on future purchases.
Assessment:
1. Take a screenshot of your PivotTable, and label it “Lab 2-3 Submission.jpg.”
Lab 2-3 Alternate

Apply the same steps as Lab 2-3 to the Lab 2-3 Alt Data.xlsx dataset.
Open Excel File Lab 2-3 Alt Data.xlsx, and follow similar directions to those in
the preceding discussion. Thrustmaster sells game controllers, joysticks, and steering
wheels for PC, XBox, Nintendo, and Playstation consoles. A summary of the
company’s sales is included in the dataset.
Required:
Calculate gross margin by customer.

Assessment:
1. Take a screenshot of your PivotTable, and label it “Lab 2-3 Alt Submission.jpg.”
page 93
Lab 2-4 Inventory Management by Customer

Profitability (Tableau)
Keywords
management
Lab Insight
Merchandising companies sell product to customers. They make money by selling
the product for more than the cost of the product. In this lab, we compute the gross
margin and then determine the most profitable customers. By highlighting the most
profitable customers, the merchandising company can focus its efforts on selling
more product to those customers that help the company make more profits.
Required:
1. Create a calculated field for the Gross Margin.
2. Create a summary table that shows the gross margin per customer.
Ask the Question

Which customers are the most profitable?
Master the Data

Open Tableau.
Fruitopia sells exotic fruit from throughout the world to customers throughout
the country by mail order. The company keeps a sales journal that records each sale
and its related sales and cost details. This sales journal is for March 1–4, 2021.
Data Dictionary
Invoice #: Invoice number for each sale of fruit
Customer #: Customer number making purchase
Zip Code: Zip Code of customer making purchase
Date of Sale: Date of Invoice
Quantity (Pounds): Weight of each product sold
Sales: Total sales price of product sold
Cost: Total cost of product sold
Step 1
Connect Tableau to the Excel file. From Tableau, select Connect > Microsoft
Excel, then browse to the location where you have saved file Lab 2-4 Data.xlsx, and
click Open (as shown in Exhibit 2.43).
page 94
EXHIBIT 2.43
Step 2
EXHIBIT 2.44
Step 3
Right click in the Measures area to create Calculated Field (as shown in Exhibit
2.45).
EXHIBIT 2.45
page 95
Name your new calculated field Gross Margin.
Gross Margin is calculated by subtracting the Cost field from the Sales field.
Type in Sales - Cost (as shown in Exhibit 2.46).
EXHIBIT 2.46

Step 1
Now that we have created our calculated field, we can build a table that replicates
the PivotTable you made earlier in the lab.
If Customer has defaulted to Measures, you will need to drag and drop it into
the Dimensions area of Tableau as shown in Exhibit 2.47.
EXHIBIT 2.47
page 96
Double click Customer to see a Customer list, then double click Gross Margin
to see the corresponding gross margin value for each customer (as shown in Exhibit
2.48).
EXHIBIT 2.48
Step 2
Our last step is to sort Gross Margin from highest to lowest to find the most
profitable customer. To do so, we select the Sort icon (as shown in Exhibit 2.49).
EXHIBIT 2.49
Assessment:
1. Take a screenshot of your chart, and label it “Lab 2-4 Submission Tableau.jpg.”
page 97
Lab 2-4 Alternate

Open Tableau and connect to Excel File Lab 2-4 Alt Data.xlsx; then follow
similar directions to those in the preceding discussion. Thrustmaster sells game
controllers, joysticks, and steering wheels for PC, XBox, Nintendo, and Playstation
consoles. A summary of its sales is included in the dataset.
Required:
Calculate gross margin by customer.

Assessment:
1. Take a screenshot of your chart in Tableau, and label it “Lab 2-4 Alt Submission jpg.”
page 98
Lab 2-5 Inventory Management by SKU

Profitability (Excel)
Keywords
SKU, product profitability, inventory management
Lab Insight
Merchandising companies sell product to customers. The company makes money by
selling the product for more than the cost of the product. In this lab, we compute the
gross margin for each product and then determine the most profitable products to
sell. By highlighting the most profitable product, the merchandising company can
focus its efforts on selling the products with the highest profits.
Required:
1. Create a histogram (showing relatively frequency in the dataset) of the gross margin percentages using bins
of 0.025 size.
2. Get a list of SKUs in the highest 0.025 bin (from 0.40 to 0.425).
Ask the Question
Which products (SKUs) are the most profitable to sell?
Master the Data

Fruitopia sells exotic fruit from throughout the world to U.S. customers by mail
order. The company keeps a price list for each product. We will work from that price
list to find those items that are most profitable per dollar of sales.
Data Dictionary
Sales price per pound: Total sales price per pound of product
Cost per pound: Total cost of product sold per pound of product
page 99
Open Excel File Lab 2-5 Data.xlsx, which has the Fruitopia Price List (as shown in
Exhibit 2.50).
EXHIBIT 2.50

Step 1
We first need to compute the gross margin for each SKU. A SKU stands for
stockkeeping unit and serves as an alphanumeric identification to track a particular
product for inventory purposes.
We’ll start by going to cell E1, typing the title, “Gross Margin,” and inserting a
bottom border. In cell E2, we’ll compute the gross margin on each line item sold. To
do so, we must subtract the cost in cell D2 from the sales in cell C2 by inserting the
formula “=C2-D2”; then hit enter (as shown in Exhibit 2.51).
EXHIBIT 2.51
Now copy that formula down for every sale below from cell E3:E82.
We also need to compute the gross margin percentage. Click on cell F1, type the
title, “Gross Margin Percentage,” and insert a bottom border. That is, we compute
the percent of every dollar of sales that is gross margin. To compute the gross
margin percentage, go to cell F2 and enter “=E2/C2” (Exhibit 2.52).
page 100
EXHIBIT 2.52
We’ll then copy that formula down for every sale below from cell F3:F82.
Step 2
Our objective is to compute the gross margin and gross margin percentage for each
product and highlight which products make the highest gross margin.
To start our analysis, we will plot the gross margin percentages using a
histogram to see the frequency of gross margin percentages in each bin.
Insert in cell I1 the word “Bins” and insert a bottom border. Insert the following
bins beginning in cells I2: 0, 0.35, 0.375, 0.40, and 0.425 (as shown in Exhibit 2.53).
EXHIBIT 2.53
We will need the Data Analysis Toolpak to use the Histogram tool. If you
haven’t installed the Data Analysis Toolpak, please do so by going to File > Options
> Add-Ins > Analysis Toolpak and selecting OK.
Once the Data Analysis Toolpak is installed, go to Data > Analysis > Data
Analysis > Histogram (as shown in Exhibit 2.54).
EXHIBIT 2.54
page 101
For Input Range, input $F$1:$F$82, to get all the gross margin percentage
possibilities.
For Bin Range, input $I$1:$I$6, to get the bins.
Click Labels because we have included the labels in our bin range as shown in
Exhibit 2.55.
EXHIBIT 2.55
Click OK to get the result shown in Exhibit 2.56.
EXHIBIT 2.56
The histogram gives us a good illustration of the distribution of the gross margin
percentages.
Step 3
We’ll now work on the second requirement: Get a list of SKUs in the highest 0.025
bin (from 0.40 to 0.425). We could sort the gross margin percentages from lowest to
highest and copy the 24 SKUs in that range.
A second, more sophisticated way to get that list is to use a PivotTable. To do so,
click Insert > PivotTable.
Drag [Gross Margin Percentage] from PivotTable Fields into the Rows and
[SKU] from FIELD NAME into ΣValues fields in the PivotTable. The ΣValues will
default to “Count of SKU.”
The resulting PivotTable will look like as shown in Exhibit 2.57.
page 102
EXHIBIT 2.57
Right-click on one of the numbers under Row Labels in column A, and select
Group.
Insert 0.325 for “Starting at:”, 0.425 for “Ending at:”, and 0.025 for “By” in the
Grouping dialog box, as shown in Exhibit 2.58.
EXHIBIT 2.58
And click “OK” to get the result shown in Exhibit 2.59.
page 103
EXHIBIT 2.59
Note the counts of SKUs in each bin are the same as those shown in the histogram.
The second requirement asks us to get the detailed listing of those that are in the
0.4 to 0.425 gross margin percentage range. To do, all we need to do is double click
on cell B7 with the 23 under “Count of SKU.” By double clicking on it, it will give
us the list of the products in the 0.4 to 0.425 range, as shown in Exhibit 2.60.
EXHIBIT 2.60
Share the Story

We can share the story by reporting our findings to the sales staff and company
management to promote those inventory items (fruit) that are most profitable.
Potentially, we could send additional advertising emails to our customers promoting
these items.
Assessment:
1. Take a screenshot of the bins for your histogram, and label it “Lab 2-5 Submission 1.jpg.”
2. Take a screenshot of your detailed listing of fruit products sold from the 0.4 to 0.425 gross margin
percentage range, and label it “Lab 2-5 Submission 2.jpg.”.
page 104
Lab 2-5 Alternate

Open Excel File Lab 2-5 Alt Data.xlsx and follow similar directions to that
above. Thrustmaster sells game controllers, joysticks, steering wheels for PC’s,
XBOX, Nintendo and Playstation consoles. A summary of the price list of the
company’s products by SKU is included in the Excel spreadsheet.
Required:
1. Create a histogram of the gross margin percentages using bins of 0.025 size. Use bins 0.425, 0.45, 0.475,
0.5.
2. Get a list of SKUs in the highest 0.025 bin (from 0.475 to 0.50).
Assessment:
1. Take a screenshot of the bins for your histogram, and label it “Lab 2-5 Alt Submission 1.jpg.”
2. Take a screenshot of your detailed listing of fruit products sold from the 0.475 to 0.50 gross margin
percentage range, and label it “Lab 2-5 Alt Submission 2.jpg.”
page 105
Lab 2-6 Inventory Management by SKU

Profitability (Tableau)
Keywords
management
Lab Insight
Merchandising companies sell product to customers. The company makes money by
selling the product for more than the cost of the product. In this lab, we compute the
gross margin for each product and then determine the most profitable products to
sell. By highlighting the most profitable product, the merchandising company can
focus its efforts on selling the products with the highest profits.
Required:
1. Create calculated fields for the Gross Margin and Gross Margin Percentage.
2. Create a histogram to visualize the distribution of Gross Margin Percentage across SKUs.
3. Adjust the automated bin size to .025.
4. Create a list of SKUs in the highest gross margin percentage.
Ask the Question

Which products are the most profitable?
Master the Data

Open Tableau.
Fruitopia sells exotic fruit from throughout the world to customers throughout
the country by mail order. It keeps a price list for each product. We will work from
that price list to find those items that are most profitable per dollar of sales.
Data Dictionary
Sales price per pound: Total sales price per pound of product
Cost per pound: Total cost of product sold per pound of product
Step 1
Connect Tableau to the Excel file. From Tableau, select Connect > Microsoft Excel,
then browse to the location where you have saved file Lab 2-6 Data.xlsx, and click
Open (as shown in Exhibit 2.61).
page 106
EXHIBIT 2.61
Step 2
EXHIBIT 2.62
Step 3
Right click in the Measures area to create Calculated Field as shown in Exhibit 2.63.
EXHIBIT 2.63
page 107
Step 4
Name your new calculated field Gross Margin.
Gross Margin is calculated by subtracting the Cost per pound field from the
Sales Price per Pound field. Type in Sales Price per Pound–Cost per pound.
Tableau will automatically configure the words into references to the fields in the
dataset (as shown in Exhibit 2.64). Click OK.
EXHIBIT 2.64
Step 5
Create a Second Calculated Field. Name your new calculated field Gross Margin
Percentage.
Gross Margin Percentage is the percent of every dollar of sales that is gross
margin. It is calculated by dividing Gross Margin by Sales Price per Pound. Type in
Gross Margin / Sales Price per Pound. Tableau will automatically configure the
words into references to the fields in the dataset (as shown in Exhibit 2.65).
EXHIBIT 2.65

Step 1
To get us started, we want to create a histogram to display the distribution of gross

margin percentage across SKUs.
Double click Gross Margin Percentage to begin working with the measure.
Notice that Tableau defaults to displaying the value as an aggregate measure
(SUM) in a bar chart.
page 108
To change this default visualization to a histogram, select histogram from the Show
Me pane as shown in Exhibit 2.66.
EXHIBIT 2.66
The histogram will default to very narrow bins.

To change the bin size, select the new Gross Margin Percentage (bin)
dimension, and then select Edit… from the menu (as shown in Exhibit 2.67).
EXHIBIT 2.67
Change the Size of bins to .025, then click OK (as shown in Exhibit 2.68).
EXHIBIT 2.68
page 109
Step 2
We’ll now work on the second requirement: Get a list of SKUs in the highest 0.025
bin (from 0.40 to 0.425). We could sort the gross margin percentages from lowest to
highest and copy the 24 SKUs in that range.
Right click on Sheet 1 then click Rename to rename the sheet (as shown in
Exhibit 2.69).
EXHIBIT 2.69
Rename the sheet Histogram.

Open a new sheet (Exhibit 2.70).
EXHIBIT 2.70
Name this new sheet Tabular Data.

Double click SKU to get a unique list of all of the SKUs in the dataset, and then
double click Gross Margin Percentage.
Double click Description to make the Tabular Data more interesting and
intuitive to interpret.
Step 3
We can create a dashboard (a graphical summary of various measures tracked by a
company) to view both of our charts in the same pane. Click the icon to create a new
Dashboard (as shown in Exhibit 2.71).
EXHIBIT 2.71
page 110
Drag and drop each Sheet (Histogram and Tabular Data) to the Dashboard pane
(as shown in Exhibit 2.72.
EXHIBIT 2.72
Click the histogram sheet to make it active, and select the Use as Filter button.
This will allow you to click any of the bars in the histogram to activate that bin as a
filter for the entire dashboard as shown in Exhibit 2.73.
EXHIBIT 2.73
Click the bin with the highest percentages in it to filter the Tabular Data list (as
shown in Exhibit 2.74).
EXHIBIT 2.74
page 111
Remember that you can also sort your results by clicking the sort buttons in the
menu (as shown in Exhibit 2.75).
EXHIBIT 2.75
Share the Story

We can share the story by reporting our findings to the sales staff and company
management to promote those inventory items (fruit) that are most profitable.
Potentially, we could send additional advertising emails to our customers promoting
these items.
Assessment:
1. Take a screenshot of your histogram, and label it “Lab 2-6 Submission 1 Tableau.jpg.”
2. Take a screenshot of your dashboard, and label it “Lab 2-6 Submission 2 Tableau.jpg.”
Lab 2-6 Alternate

Open Excel File Lab 2-6 Alt Data.xlsx, and follow similar directions to those
provided in the preceding discussion. Thrustmaster sells game controllers, joysticks,
and steering wheels for PC, XBox, Nintendo, and Playstation consoles. A summary
of the price list of its products by SKU is included in the Excel spreadsheet.
Required:
1. Create the calculated fields for gross margin and gross margin percentage.
2. Create a histogram of the gross margin percentages.
3. Change the default bin size to .025.
4. Get a list of SKUs in the highest 0.025 bin.
Assessment:
1. Take a screenshot of your Tableau histogram, and label it “Lab 2-6 Alt Submission 1 Tableau.jpg.”
2. Take a screenshot of your Tableau dashboard, and label it “Lab 2-6 Alt Submission 2 Tableau.jpg.”
Unless otherwise credited screenshots: Source: Microsoft Excel
Magnifying glass: PureSolution/Shutterstock
1Bernard Marr, “Big Data: 20 Mind-Boggling Facts Everyone Must Read,” Forbes, September 30, 2015,
http://www.forbes.com/sites/bernardmarr/2015/09/30/big-data-20-mind-boggling-facts-everyone-must-
read/#2a3289006c1d (accessed November 10, 2016).
2H. Chen, R. H. L. Chiang, and V. C. Storey, “Business Intelligence Research,” MIS Quarterly 34, no. 1 (2010), pp. 201–
203.
3Revenue recognition standard (ASU No. 2014-09), issued in 2014.
4Roger S. Debreceny and Glen L. Gray, “IT Governance and Process Maturity: A Multinational Field Study,” Journal of
Information Systems 27, no. 1 (Spring 2013), pp. 157–188.
5M. G. Siegler, “Eric Schmidt: Every 2 Days We Create as Much Information as We Did up to 2003,” TechCrunch,
https://techcrunch.com/2010/08/04/schmidt-data/ (accessed July 1, 2019).
6J. Rizkallah, “The Big (Unstructured) Data Problem,” Forbes, 2017,
https://www.forbes.com/sites/forbestechcouncil/2017/06/05/the-big-unstructured-data-problem/#532a74a4493a (accessed
November 16, 2018).
7C. McNeill, “Veracity: The Most Important ‘V’ of Big Data,” GutCheck, January 23, 2018, available online on July 1,
2019, at http://www.gutcheckit.com/blog/veracity-big-data-v/.
8V. J. Richardson and M.W. Watson, “Act or Be Acted Upon: Revolutionizing Accounting Curriculums with Data
Analytics,” University of Arkansas working paper, 2019.
9https://18knowledge.com/blog/walmarts-retail-link-point-of-sale-data/ (accessed November 15, 2018).
10A. Curtis, V. Richardson, and R. Schmardebeck, “Investor Attention and the Pricing of Earnings News,” 2014,
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2467243.
11Tim Loughran and Bill McDonald, “When Is a Liability Not a Liability? Textual Analysis, Dictionaries, and 10-Ks,”
Journal of Finance 66, no. 1 (2011), pp. 35–65.

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page 48

A Look at This Chapter:

PwC recommendations for evolving skill sets for an auditor:

DATA, DATA ANALYTICS, AND ACCOUNTING!

MASTER THE DATA: THE SECOND COMPONENT OF

In Chapter 1, we discussed the importance of asking a specific question that can

WHAT IS BIG DATA?

WHAT ACCOUNTING DATA IS AVAILABLE TO

Financial Accounting Data

Financial Statement Data

Receivables Subledger (or Subsidiary Accounts Receivable Ledger)

Financial Accounting-Related Data

Conference Call Transcripts–Website links

XBRL (eXtensible Business Reporting Language)

Managerial Accounting Data

Standard Cost Data

Supply Chain Data

Customer Relationship Management Data

Human Resource Data

Employee benefits (stock options, bonuses, health insurance, etc.)

Current and Historical Stock Prices

Sometimes data analysts employ computer programs (sometimes called machine

SOME EXCEL BASICS: THE PIVOTTABLE

ANSWERS TO PROGRESS CHECKS

Multiple Choice Questions

Accounting Data Term

Data Characteristic Big Vs of Big Data

Data Provided Data Source

1. Download the file “Problem 2-1.xls.”

1. Download the file “Problem 2-2.xls.”

1. Take a screen shot of the first page and label it 2-4.jpg.

LAB 2-1 Accounts Receivable Summary by Customer (Excel)

Lab 2-1 Accounts Receivable Summary by

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In cell D1, type the title “Days Past Due.”

Then click OK.

To get started on a PivotTable, we go to the Table Tools—Design menu (as shown in

Select “Summarize with PivotTables” (as shown in Exhibit 2.25).

And select “Table1” for the Table/Range and click OK.

Inputs into PivotTable

This gives us the total invoice amount by customer.

We could do the same for any of the customers, including eBay.

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Lab 2-1 Alternate

Lab 2-2 Accounts Receivable Summary by

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Name your new calculated field Days Past Due.

KATIE’S DATA TIP!

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Lab 2-2 Alternate

Lab 2-3 Inventory Management by Customer

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Perform the Analysis

We first need to compute the gross margin of each sale.