Step 4 - Chapter 1 - A Way of Viewing Business

Chapter 1 – A Way of Viewing Business

In Australia there is a number of accounting software packages businesses can use to record their business transactions and produce their financial statements. I personally, have used MYOB (Mind Your Own Business) and Quicken/QuickBooks. When I was a senior in High School I did Business Communication and Technology as a subject and a specific assignment piece was to create a business and record its financial transactions using MYOB. MYOB is a fantastic product however, I found if accidently entered the incorrect amount or posted it to the incorrect account it was a nightmare to fix it. I found that with MYOB you need to remember the guide to ensure you are not wasting time trying to fix a mistake. My mistake was I tried to jump in without reading the manual on MYOB which lead to all sorts of mistakes – this is the main reason I do not like MYOB. I also have been exposed to Quicken/QuickBooks due to my family owned their farm and rental properties. Personally, Quicken/QuickBooks I found easier to use and get your mind around then MYOB’s setup. I found it was easier to fix mistakes when you either entered the incorrect amount or posted to the incorrect account in Quicken/QuickBooks. If I was going to open a business I would use Quicken/QuickBooks accounting system over the MYOB accounting system any day but that is just from my personally experience.    

When Martin wrote “accounting is also not like a corporate camera taking precise photo of what is going on” this is absolutely correct. I had and still do have a part-time job with a company called “Dimmey’s” in late 2013 Dimmey’s went into Voluntary Administration. Now you might be wondering why I have bought this up, the reason is because many people think Dimmey’s went into Voluntary Administration was due to financial miss-management. This idea/perception is false, the reason Dimmey’s went into Voluntary Administration was because Dimmey’s was fined $3 million for breaching product safety laws. The owner could not raise the capital to pay the fine so he decided to put the company into Voluntary Administration. Therefore I have come to the conclusion that the financial statements and accounting may not paint the full picture of a company.

People are surrounded by markets everywhere where we go such as: suppliers, employees, customers, debt investors and equity. When people walk down to the store and go to Woolworths or Coles they could possible buy products that are domestic grown or international grown to eat. The buyers of any company needs to research the products they are buying and ensure they are up to the Australian Standards otherwise they will end up like Dimmey’s with a huge fine for breaching the rules and regulations. If you think about it when you walk down the street you have markets everywhere. For example Women’s Clothes you have Target, K-mart, Ice, Alley, Dimmey’s, Big-W, BMAC, Cotton On, Bras-N-Things and many more small boutiques. All these have markets with different suppliers that are why Women visit a range of shops because no two shops have exactly the same stock. Shops many have the same brand but they do not have the same style or colours. By having a range of shops selling the same line the shops have to be competitive otherwise they will destroy the business they have. A personally experience I have with destroying the value of a product would be when working at Dimmey’s. Dimmey’s sells a range of children’s clothing, women’s clothing and men’s clothing at a realisable price anywhere from $10 up. Management recycles clothing that means that if it did not sell great one winter we would pack it up and bring it out the next winter which means the style is two or more years old. Customers are not going to buy two or more years old when they can go to K-mart or somewhere with the same pricing and get the latest fashion. This is an example of destroying the value of a particular line (Women’s Clothing) and the problem now is getting the customers to come back to Dimmey’s after they have found somewhere with realisable pricing and the latest fashion. Shops need to have products the customer wants at a realisable price to be successful in a business.

Business is all around us in everything we do and people who say that is not true has no real concept of business. People may not realise but business is every time you spend your money. When people are ensuring they have enough money to pay the bills, entertainment, going out with friend or for dinner you are using accounting to keep track of your personal financials. People who go bankrupt are a business that has miss-managed their finances. Every time when a person walks into a shop or shops online they have used accounting to record their transactions. People are going to say but that is different. No, it is not there are three types of businesses they are: sole trader, partnerships and companies. Companies are bound by different rules and regulations then sole traders or partnerships however they still have to pay tax and purchase items that are necessary in their line of work. I like to think everyone is a sole trader and then when you are married or financially living with someone you two then become a partnership.  So my main point is that everyone uses business and is in a type of business someway some people just don’t see it.

The area I thought was boring is about the “We Build on the Past” section. I understand how Martin is trying to relate music to accounting however with the other examples in the Chapter I don’t think he needed to restate it. I also found the bit about his Law degree and typing boring, he could have left this whole section out of the study guide. The “We Build on the Past” section did not contribute to me understanding Accounting, the whole time while reading this section I was thinking how does this help me to understanding Accounting and broaden my knowledge on accounting. Secondly, with the QWERTY information, yes it is good to know about however did it really need to be in Chapter 1? Does it help me in any way to “using accounting for decision making”? The answer to both of those questions is no. Martin could have left this out and just kept the topics that directly relate to accounting.  

Having two sides to everything is a great concept and method to use to ensure you have entered the correct amount and your books balance. The whole concept of Journals and Ledgers is great because it allows the people to check the amounts they have entered. It is a way of double checking without physical re-entering everything. This leads to people ensuring they know the five key elements of accounting and which accounts are classified under which element. This is important when doing bookkeeping because each element is given a nature, if the account is increasing the nature is the same however if the account is decreasing the nature becomes the opposite. An example of this with the Cash at Bank account would be if you are banking the sales of the business, the asset is going to be increasing which will make it a debit. But if you are required to pay bills the asset will be decreasing and the amount will be entered in as a credit. This is how the double –entry accounting works. I am quite familiar with the five key elements and the accounting equation because I have worked in businesses ever seen I was 15 years old.  

To me the author is trying to tell me that business and accounting is used in every part of our lives. That without the five key elements, double-entry book keeping and the two journals trying to record business transactions would be a nightmare. People would not be able to interpret or analysis businesses because there would be no rules and society would see more people and businesses going bankrupt without the key principles and regulations.

To summary my key concepts and questions would be the following:

• There are a number of Accounting Software Packages Businesses could use.
• My favourite is Quicken/QuickBooks and MYOB is difficult when you have entered the incorrect amount or posted to the incorrect account.
• Accounting is also not like a corporate camera taking precise photo of what is going on.
• Financial Statements tell you one thing put you need to understand what the business has currently done throughout the financial year to get the full picture.
• Markets, Suppliers, Employees, Customers, Equity and Debt Investors are everywhere where we go.
• Business is all around us in everything we do and people who say that is not true has no real concept of business.
• Business is in our personal lives and professional lives.
• What did Martin include “We Build on the Past” section? This had nothing to do with accounting. It was about Martin mainly and very little if any on accounting.
• What did we need to know about typing and QWERTY in the ‘We Build on the Past” section?  
• Having two sides, debit and credit, to everything is a great concept and method to use to ensure you have entered the correct amount and your books balance.
• Without the five key elements, double-entry book keeping and the two journals trying to record business transactions would be a nightmare. 
• Without business and accounting people would not be able to interpret or analysis businesses because there would be no rules.
• Businesses would go bankrupt without the key principles and regulations of Accounting.

Above are my key concepts and questions about Chapter 1 – A Way of Viewing Business.