Step 2 KCQs

1.4 Three Things to Memorise

Life is like a journey. A transformative journey that takes you on a rollercoaster ride ever since you take that first breathe of air in the hospital room. Only recently that I have finally understood how important transformative learning is. Like average teenagers, I was only thinking of myself, living my life like there’s no tomorrow. No hopes and dreams, no goals or even no will in life. Sounds boring right? School to me is just an adult’s excuse to kick us out of the house every day and hopefully one day we all become Einstein and earned success in life. Learning to me is another wasteful process of read your hearts out and memorise everything from the book. I used to be top of the class in primary, but as soon as I hit high school it all just started to go pear-shaped. I don’t know what’s changed, but I can tell you that one thing that hasn’t change was the way I learn. My way of learning is very similar to how Martin have described it in the study guide as simply learn by memorising and reproducing facts. Throughout my educational life, I only read just for the sake of memorising few facts and formulas but because I don’t truly understand the concepts or unable to relate it to my everyday lives the information just became a blur. By the time the whole term is gone, so does everything I have learnt. I noticed that my way of learning transferred into every other aspect of my life. For example, how I learn at work is also based on memories, not that memorising is bad, but it is not the only way to learn. But memorising by itself does not help you to remember better, hence I always find myself forgetting the tasks that I needed to complete or what process I needed to do in what order. Because memorising is different from living and engaging in the moment that would then become part of us. Just by memorising slows down my learning process. Which is why I can relate to Martin’s way of describing transformative learning as I believe that it involves changing or kind of like transforming from a cocoon into a butterfly. My way of learning has certainly been transformed from simply memorising few facts to being able to connect with those information in a deeper level. Reflecting is another form of transformative learning which I have developed during my 3 years of studying at university level. Most units that I have completed involves reflective exercise that requires students to read and reflect on what they have learnt as well as what their thoughts and reactions are to learning these course or subjects. I didn’t quite understand at first because reflecting is not something that I am used to or was taught to do so I was rather confused as to why any of this has to do with improving our learning process. Until I have come across a book called Learn or Die by Edward D. Hess that I have discovered the science of learning. Our ways of learning are separated by system 1 and system 2 learning, system 1 runs on auto-pilot, fast and reflexive. While system 2 thinking is more deliberate, slow and reflective. Hess examines the process of learning from individual and organisational perspectives. This book has opened my mind into the science of learning and how important it is to train our mind to switch on system 2 thinking while making an important decision. Therefore, it is essential to reflect and engage into learning with the information because that is how we learn and able to utilise those information to its fullest capacity. As quoted by Albert Einstein that ‘Education is not [simply] the learning of facts, but the training of the mind to think’, therefore we must learn to reflect and engage in the learning process, train our mind to think deliberately, slowly and analyse the information to learn and make the right decisions.  

I love how Martin make a link to President of United States such as Donald Trump. I don’t think anyone can forget who Donald Trump is because of the impacts he has made to the rest of world, not just in the US. Martin is not wrong there about hearing his name at least 40 times in the media, news and even in cartoon such as the Simpsons. But repetition is not the only reason why we remember who Donald Trump is, because we are able to relate to the impacts that he has made. Most recently would be the start of WWIII that sprout from the threat he has made to North Korea as a warning to prevent them from creating Nuclear bomb. It is the fear, hates and arrogance that made the president of United States so infamously well-known. That is a very clever links, but if memorising and learning is different then why does Martin wants us to memorise three things? Oh okay, so what I have said before about memorising is not the only process of learning is correct because now Martin is saying that it is not either-or but both-and, meaning it is both understand and memorise. Okay I am slowly starting to get it, I guess right now I am also engaging in a transformative learning.

Three things that I must remember just one minute a day, alright challenge accepted! Bring on the new transformative learning.  

1.      Increase in an Asset is a Debit.

2.      Assets + Expenses = Equity + Revenue + Liabilities

3.      Based on No. 2, increase LH side are debits; increase RH side are credits

A recent Japanese movie that I have watched that entails a story of a young prodigy that is so good at all the subjects except English. The teacher made her write down the sentences five times and read it out loud while she was writing it and her scores dramatically improves. So, it is interesting when I was reading this, I suddenly remember the methods of learning from the movie that is very similar to Martin’s own way of learning. While this is new concepts to me, I will gladly accept the challenge and try my best to learn. 

Chapter 2: Transactions as they come

Starting off this chapter with the foundational concepts behind a firm and how it came to be. A good summary of chapter 1 which helps me to understand why and for what reason a firm is view as separate entity from its owners. Martin explains that a purpose of a business is to add value to a firm’s customers, staffs, suppliers, equity investors, debt investors, to the general community and its managers. Furthermore, Martin uses the word selfless to describe a business activity

2.1 A Firm’s Ledger

 From chapter 1, I have discovered that a ledger is made up of several accounts and is where all transactions of a firm are recorded. Each account such as assets, liabilities, equity, revenue and expenses. Ledger is the most important element of accounting as it holds the details of the firm’s realities. Martin states that a firm can have as many account in its ledger as it likes, and that it also depends on what information the managers of a firm want to capture and know about. Then how do we select what to record and what to leave out? There’s also various reporting requirements to the external parties too? Okay, all this information is a bit too much for my brain. Right about now that I feel like chapter 1 was much more enjoyable. Okay now there’s subsidiary ledgers? Why so many?

So subsidiary ledgers are just an extended version of general ledger such as accounts receivable, account payable, plant and equipment and inventory. Now it’s ringing a bell because I just remembered that we did an assignment in the previous unit that required students to look at these accounts. And I also record subsidiary for the restaurant in my accounting book as well, but this is the first time that I know the terminology and the actual meaning behind it. The point behind the Coffee Supreme examples that it needs general ledger such as account receivable, it also needs individual accounts for each of its customers to keep track of the accounts and to assists in problem solving of errors has occur. This is a good summary for me to make sense of subsidiary accounts and why it is necessary to have it. The purpose of subsidiary account is for the owner to keep track of its customers or suppliers accounts which has to also be equal to the amount in the general ledger, this is a good way to keep record which acts as a reference check to prevent inaccuracy as well as it allows the owners to react quickly if any changes occurs. Moreover, it is interesting to see that it was used to be kept physically separate to the general ledger of a firm to increase its efficiency, however till this day and age the technological advancement allows information to be kept on the same hard drive or in the cloud. Funny to say that I still prefer physical books and manually recording all the information on paper.

Trust is another subject that I did not think it would actually pop-up in accounting course, mainly because trust seems like a subject that belongs to psychology or human resources courses. But in the case of business, we do have to trust other people. Since Martin have got us to this important subject, it made me think of my work as Martin says we suppose to trust individual people who we do not know that well or if at all. How can I fully trust someone to manage my assets or how can I trust someone else to manage my money? That is why every organisation uses internal control to prevent frauds and protects its assets of thefts. I know that the purpose of accounting is to prevent frauds and thefts internally, as well as ensuring organised and accurate accounts which includes the essential details of all sides of the firms. In my last management course, I had to submit an assignment based on internal and external audits which involves an analysis of business internal and external impacts and develop a business model for the firm. However, in that unit it is based on strategic management rather than financial. So, it is interesting to see that there are so any elements that all connected that makes up a firm. It is also surprising interesting to learn that subsidiary ledgers are able to support internal controls of a firm and increase confidence that the accounting system is effective and efficient for a firm. 

2.2 The Daily Journey of Firms

Aghh the dreaded GST! Everyone knows and comes to dread the word taxes and GST. It stands for goods and services tax and what it essentially means is that consumptions of both goods and services is being taxed. The GST rate in Australia is 10% which is a lot! Because my family own a restaurant I do get a hands-on experience of GST. I usually help by separately and organise each bill of what includes GST and what doesn’t. If it weren’t for my restaurant then I wouldn’t have known more about GST because let’s face it, I don’t think anyone would pay particular attention towards GST in the first place. It is not an interesting subject to look at, however I am curious as to what are the beneficial of GST and how it affects the firms? According to Martin, there are three GST accounts:

·       GST collected – GST that a firm collects from its customers on behalf of the government which means it owes this amount to the government.

·       GST paid – GST that a firm paid to it suppliers on goods and services supplied to a firm by its suppliers. A firm generally recover this amount from the government.

·       GST payments/refunds – payments of GST by the firm to the government, where GST collected by the firm exceeds GST paid by the firm; and refunds of GST received by the firm from the government, where GST paid by the firm exceeds GST collected by the firm.

So, GST collected account will always have a credit balance, hence it is a liability! Wow, it is so good to have the details lay out for you because to me GST is something so confusing and beyond my understanding. Now that I understand more about GST, let’s hope that I can put it to use.

The next topic is on specialised journals. You mean, there are more?? Specialised journals are used to record transactions in the specific categories, that’s how I understand it? So why having so many journals and ledgers? Wouldn’t it make it all confusing? Would it enhance accuracy or a waste of time? Then again, there is a reason why double-entry accounting is still used until today.

2.3 Coffee Supreme

It is good to see more explanations into specialise journals and other ledgers as I find it rather helpful. Although at first glance all the diagrams provided are quite overwhelming because of all the numbers and letters, but after a second and third time of reading through the sections, it is then becoming clear. Upon reading this section and reflecting on the keep concepts that the author is trying to explain have allowed me to gain a better understanding of the benefits of specialised journals and its links to subsidiary ledgers and general ledger. For my restaurant, I would normally use a same technique which allows me to keep track of invoices and bills but because it was self-taught I did not know any of the technical terms for each process of accounting. I just did what makes the most sense to me and my mum also taught me these techniques which she has learnt from her previous work experience. It is really fascinating to see what I have already know is quite like what Martin is teaching us in this course, which makes me realise that accounting is not as difficult as I had expected. And maybe, perhaps I can get a good mark in this unit. Or maybe I’m just dreaming. Anyway, specialised journal is a process that assists the internal audits and it is a good refresher to understand the concepts in a deeper level and able to make sense of these process a bit more.

Right, before we move on to the next section, another thing I have to make sense of is general journal. Hmm so are we done yet? Are there any more journals? Why is accounting so complicated? I can’t imagine doing this for a living, honestly, I think my hair is turning grey as I type. So, let me try to make sense of this, general journal is where other transactions that do not fit into specialised journals will be entered. Which it needs to include more detail to make it clear what the transaction involves such as bad debts written off, credit sales returns, etc. Okay, so far so good. Just half side of my head is grey that is all. Having said that, I feel as though I understand and able to relate to these examples much more than just reading textbook. It helps me to understand of how each transaction are arranged once it takes place and how it all interlinks in one accounting system to enhance internal as well as external audits.

2.4 Cash and Non-Current Assets

Cash is the life-blood of any business. How do you know, cash is also my life-blood. It fuels my body and much the same as it flows through a firm to preserves and sustains its life. Whenever I run out of cash, my body will not function as well, so I think the firm would be the same. I can totally relate to this section. It is extremely important to keep track of cash which brings us to the topic of bank reconciliation. I have heard of it before, but because I have yet to use it in my everyday lives it has not cross my mind. Maybe because I don’t work in a big accounting firm nor own a big firm, but I am interested to learn more about this subject. So basically, bank conciliation is another accounting record that the firm keeps in order to compare the information with the bank statements to identify and clarify any differences between them. So of course, with the advancement of technology this process can be done each day, if there are differences it will need to be entered adjusting journal entries. Alright, that makes perfect sense and I am so glad we have the advancement of technology that could easily be access. I wonder, how often does an error occur and if they do occur, will it significantly impact the firms accounting?

Depreciation

Keeping a careful track of cash is not enough? We have to keep an eye on firm’s non-current assets too? Who am I kidding, this is accounting right, it’s not meant to be easy. Alright, so I am familiar with the concept of depreciations which means that the resources that are used over-time are losing its values. examples of non-current are things such as goodwill, land, buildings, cars, delivery vans, machinery, chairs and desk in the office. Nothing last forever. Depreciation of non-current assets is calculated in a firm’s accounts to reflect the reality which designs to estimate of how much non-current assets have been used up during a period as part of firm’s business operations and processes. It is done by allocating on some basis the original cost of each non-current asset of a firm to each period (usually a year) that the non-current asset is expected to be useful to a firm. But how do we work out the depreciation percentage? So depreciation rate is set out by the government? Accelerated depreciation? Depreciation is the most confusing concept for me, but I am determined to learn more the subject and the methods involves in the next chapter.

Wow that took me a long time to finish chapter 2. I was overwhelmed by all the information that was discussed. I must confess that I didn’t enjoy this chapter as much as I did for chapter 1 but it was quite intriguing to see all the different firm’s accounts and how to arrange each transaction into those accounts. The importance of each process and how it relates to one another is fascinating. Learning about accounting certainly keeps me on my toes because the concepts are not plain black and white which requires full attentions and further research into each section. Despite that, learning about the details and processes that does on in accounting makes me appreciate the subject and respect this profession even more than I was before. I can’t wait to learn more about it and put theory into practice in my assignment!