Acct11059
Assignment 1
Hmmm… ok, where does one start with this assignment? Writing an essay on our thoughts on our first two weeks of reading. Well, I guess this is math and not English. Definitely nervous would be a mild understatement. How does one feel about accounting? Honestly, how are we meant to feel? Excited? Nervous? Overwhelmed? Anxious? I can defiantly say there is a broad spectrum of feelings and emotions happening every time I read our study guide, or jump on Peer wise.
“How do we learn?” was a really interesting question. I definitely found it somewhat accurate, when we read something, when the question was explained further and how most of the info may not “stick”. Last week, I read half a chapter for another subject, and now, I can’t remember more than 20% of what it was I read. So, to increase my knowledge and understanding, I need to absorb my readings better. I think I will apply my KCQs to this subject too. Another thing I found intriguing in the introduction chapter was the statement that to learn is to change. I never really recognised that however I do understand the statement.
I wasn’t
sure what ‘Rote learning’ is. Thanks, google – Rote learning is memorising our
learning. My journey so far on Peerwise’s
has shown its addictiveness and how it has definitely left my body feeling
excited and anxious with every answer.
The thrill to try and increase my rating on questions I post is never
diminishing.
I must admit I am excited at the prospect of learning more about how to explore
firms accounts. Especially because the
reason I am doing this cause is to try and better my own Newsagency business. I want to know more about numbers and how to
make them work.
I know how to use MYOB, and had a giggle to myself, that it is an acronym for Mind Your Own Business, as we joke about it with the kids.
I love the opening paragraph on page two, Chapter one. Business is where we can make a difference.
I understand
that an understanding of accounting and numbers would help a business grow, I
had actually assumed that a CEO or Managing Director would have been required
accounting as a prerequisite for their large position. To me it would make common sense.
We also learn in our first study guide that Yeppoon has many businesses around
the town centre area and this is where the accounting learning started for me. I already knew about the different types of
businesses, but was interested to learn a small amount on Trusts. I hope we get to learn more about them as I
hope to set some up for my children one day.
I understand that business need to keep on top of their record keeping, and that this is important. We learn how double entry has been around for many years, with the Father of Accounting – Luca Pacioli publishing a book on it in 1494.
I find myself giggle as Martin tells us of how fast he learned to type, thankful we don’t have typewriters anymore.
Martin tells us in our study guide that double entry accounting is a system of recording transactions showing the relationships of the different elements to each individual business. There are some accounting software packages listed here for us to be aware of, currently I am aware only of MYOB and QuickBooks.
1.3 – Confidence
– why is it that we (and by we, I truly mean me) are asked how confident we are,
we instantly start to doubt ourselves?
We learn here that a journal and ledger are the two types of books in
accounting. A journal is used for
everyday transactions, where as the Ledger is used for the same transactions,
just divided up into their relevant accounts. Although these are rarely used with
technology, I do want to remember that a ledger has a trial balance worksheet
to check the books balance before they would be handed onto the accountant for
finalisation.
Proprietorship – ok, I found this description interesting and has raised
questions for me on our business setup, as it is a Pty. So I will email my
accountant on that one.
Something I wanted to make sure I remembered correctly also is debits and credits with equity and liabilities. So, if we debit an asset account, the liability account is credited. The asset must be paid for. Equity = Assets – Liabilities. Often is also Assets = Equity + Liabilities
As martin delves into the explanation of Double entry accounting, I find myself a little confusing, yet(hopefully) understanding the logic at the same time.
1.4 – The five elements of accounting. I am glad to have read this section, as I do get confused with revenue, profit and expenses. Assets are an item that can help produce funds, such as stock, a lotto counter, or shop front. Liabilities are bills, and mortgages. Equity is the sum above – Equity = Assets- Liabilities. Also commonly put, left overs.
Measure of Value – I didn’t have many KCQs here, however, I do understand that each business needs a value. The Equity. I also comprehend that as a business opens and closes like the stock market, these values will change daily.
Revenue however is when liabilities diminish and assets increase, giving the business more equity. Expense is a costing like a fuel for a delivery vehicle. It is not always asset based.
As a business owner, I believe that there are things in Chapter 1 I probably should have known and can understand why 50% of large companies have CEOs with accounting background. It makes sense. However, I am looking forward to learning understanding and comprehending the five elements of accounting. I can definitely see this is only the surface.
Small things I want to remember-
Debits to the left and credits to the right.
Trust underpins all of business.
Company KCQs
One thing that keeps coming up with this assignment is – Am I happy with the company I have been given? I find this question interesting. If I was to pick a company, which one would I pick, realistically? Actually, now, I ponder it, what company would I pick? Would I pick a company that i deal with in my business, or a company that my husband works for, Yancoal? Maybe even one we invest in with our self-managed super? How would I sit down and pick? To say that I am grateful that we do not have to pick is definitely modest and I have so far enjoyed getting to know this company, and its business. I am looking forward to learning more about the company and understanding in detail the financials. Another thing I am intrigued on is we discuss revenue. We discuss assets, equity, liability etc. However, in my annual report, the directors discuss the large amounts of funds of their client’s base. Where is this allocated in the financials? I understand that revenue and sales turnover/investments are definitely different, so I am intrigued to see this side of the numbers on paper.
KCQs – Chapter 2
Straight off the bat, it hits me. “Besides those managing a firm, there can be many other people with a genuine interest”. Many times, Martin discusses how business isn’t just involved with the owner, and the bank. There is the community around accounting and businesses. Business’ effect their community.
I understand that Managers of their firm are able to ask for any paperwork from their business. No limit. However, outside companies, such as financial institutions and banks are governed by rules and regulations. I found this interesting. So, a manager who doesn’t always necessarily need all the info, can access it, however a bank is limited with what they can ask for? Within reason, I understand. But wouldn’t the bank have more reason to want more info?
I wonder, the 1930s when everything was changing, did this have anything to do with the depression in the 20s? Was this a way for governments to try and stop this happening again, if things were more visible? I may be way off base… but just a thought.
Hmmm Rules. I am a stickler for rules.
GAAP – Generally accepted
accounting principles
AASB – Australian Accounting Standards Board
ASIC – Australian Securities and Investments Commissions –
ASX – Australian Stock exchange. – led me to want to know how does a business
come to float in shares and, does it have to have a certain value to be able to
do so?
IASB – International Accounting Standards Board
IFRS – International Financial Reporting standards
However, I do understand that there are too many shades of grey that you can not have rules for all accounting moments. Ah-ha this explains the teaching method. Not just regurgitated learning.
Accrual accounting – all too familiar with this one and people not paying their paper bills…. Now I have a name for it when talking to my accountant. 😊
Two Key qualities – Truth and faithful representation. I can understand this.
To answer your question Martin, are we being marketed to with a firms financial statements, I definitely think this is the case. My company has released many media Reports etc so it was a little harder to find some negatives on the company. BUT they are there. A company wants everyong to think everything is dandy so they will invest more money. Why would they tell you the entire greysale truth?
KCQS – Chapter 3
Well, I do love a good party, although it has been a while, so it was nice to meet Chris and Sarah.
AKA
The Balance Sheet – The Income Statement – Statement of Changes in Equity (SOCIE) – Statement of Cash Flow.
There are no specific rules about how these are set up, which is interesting considering how many rules there are in accounting.
I understand that the financial statement is the bowl that all of the above will be found.
A balance sheet shows the days position. This was a new thing to learn. I thought it was an annual.
I have to say all this talk about the financial statements this chapter, I am getting a little overwhelmed, but I haven’t tuned out as yet. I have actually gone the other way and asked for my own Companies financial statements from my accountant. I will be looking at these in our week break, as BAS needs to be done…. (enter eye roll here) so this is going to be an interesting exercise. One I am not sure I am brave enough to take, but will anyway.
I understand the revision about trust in business as in the financial statements in chapter 2.
I understand there has been in history discussions on ratios and structure regarding Financial statements and how to interpret them. I must admit I did get a little wayward here. AH -HA the analysis of financial statements helps achieve an idea of a company’s worth. Could you also use this when marketing a company for sale, I wonder?
As I read on, my question is answered. Thank you Martin.
I understand the concept if you will of dividends, and the relationship between the firm and the equity investors. I will however be re-reading the last few pages again to help me understand the formulas in regards to the net cash flow, operating cash flow and capital outlays.
Just Chequing in 