ACCT11081

Assessment 1

Step 1: Here we go again.

1.1 Reading is one of my favourite things in the world, although I often must refrain from reading during the term because I lack self-control and will frequently chose reading a book over studying. I find reading to be a journey, I love seeing the world from another person’s point of view. I can experience other cultures and lives in the comfort of my own home. Living through the thoughts someone is having at an exact point in time, builds connect and helps develop a deeper meaning. Therefore, the study guide is so important throughout this unit, to learn how to connect and make connections, because we will have to learn to read and make similar ‘point-of-time’ connections in a firm’s accounts.

Bookkeeping and record keeping are a little like a family tree. Everyone and everything in a family tree is interconnected in some way. Without the foundations you cannot see where you came from and the people who have led to your existence or influenced you in some way. Your lineage. All businesses have a foundation and different branches, hurdles and periods of growth. By tracing the records, businesses can explore their heritage, realities (genetics) and the complexities that has created them. The concepts behind learning bookkeeping is like fixing cars. My father is handy with cars and has taught me a lot over the years. Similar, to the human body cars are made up of various systems and individual components, working together. To understand what is causing a fault, you must understand what every item, within each system does to contribute to the working car. For instance, a few years ago my husband’s car was over-heating. Now the cooling system that is meant to keep the engine cool whilst running, wasn’t working properly. Within the cooling system you have many parts, the radiator, the thermostat and various pipes, hoses and other items. It turned out to be the thermostat in the end. But, if my father had not known and understood how the different systems work and interact, it could have continued and resulted in a more expensive fix, like a warped head.

1.2 To me religion is like the foundations of double-entry accounting. Teachings from the past that have been adapted only slightly, but still hold great power in the present. I am not religious, but to me religion is the moral concepts that have been written into elaborate stories. Religion is a powerful tool and when utilized correctly, it helps people find hope and builds connections. However, when abused it can have detrimental effects. Similarly, accounting or bookkeeping are the same. Double-entry accounting is like your bank statements and your budget plan, you bank statements merely show the transactions within your accounts. Whereas, your budget plan shows how the money is divided up and where it goes. To me this is like the fundamental aspect of double entry accounting. At the beginning you have your total income, or debit to your bank account, from the debits, come the bills and costs associated with living, the credits. In your bank account it is simply a list of what has come in and gone out in order. For your budget, it shows why, where and how the money is being divided. For us, our bank statements and budget stay with use because we are responsible for our ‘business’ dealings. For businesses, it is important to show integrity and disclose the accounts with employees, equity investors and debt investors, so they may also take some responsibility for their part within a firm. Furthermore, the concept that double entry accounting is a two-sided story seems a lot like blood tests. Where upon the outside visual, you may seem perfectly healthy, a blood test gives you an in-depth view of how your body may be functioning on an internal scale.

1.3 The five elements of accounting are like home budgets and incomes. The assets you hold personally would include your family home, super and your car. Whereby, they are all expected to provide you stability or economic benefit in the future. Your home is the place you live, in most cases the market value of your house will increase in value or at the very least you will pay off any debt incurred from acquiring it in the first place. Your super is the asset you hold to support you in the future when you can no longer work or decide to give up work, and finally your car, is the means by which you get to and from work, for most people at least. Shares or cash bonds may be the easiest asset to own these days because the investment you make today is expected to provide more in the future.

Liabilities, personally these would be the bills you pay. The mortgage or rent is a recurring debt that comes out regularly and the interest you pay on top, also puts you at more of a loss in the future. Mortgage repayments are the economic loss you pay due to the agreement you made in the past.

Equity, in domestic settings is the savings you hold on your bank or the money you have made on your home from either capital gains or paying off the debt. The equity on your home loan can be used to purchase other assets, hence the Equity = Assets-liabilities. In simple terms, If you were to purchase a house for $500,000, the mortgage on the property is $370,000 and the property value has no increased to $550,000 that would mean that you currently have $550,000 – $370,000 = $180,000 in equity. Of course, this is a simplistic way of looking at home loans and property values, but to me this is the way I understand equity.The concept of value is as Martin said a fundamental one. We all want to live a life of value or be valued. The value of your friendships, your value at work and of course, the value of your finances. Everyone wants to be and do good; in the way they understand the meaning of good. For firms, it would be no different, a firm wants to add value and make good choices to benefit the company. If you choose to study a certificate in your chosen career path, you are adding value to your professional life, if on the other hand you have a child, you are adding value to your personal life. Change is important and deciding what adds value to your life is a personal journey.

Revenue and expenses, or for me other income and bills. To add revenue or gain more from your investments, you must decrease your liabilities or expenses. As with all businesses, I must seek to increase my other income/revenue and decrease my expense/liabilities. Cutting down on takeaway coffee, cancelling Netflix or negotiating a lower interest rate on investment properties is a quick and easy way to cut down my expenses. Increasing my income or revenue is a little trickier. It would involve selling shares or an investment property for a higher price than I originally paid or getting a pay rise, which my boss would be reluctant to give because he is also trying to lower his expenses.

In conclusion, Accrual accounting is a different way of looking the realities of a firm, by breaking it down and separating all the different aspects and then manipulating them to get a real picture. The five aspects are all fundamental aspects of business life and by manipulating the amounts of each aspect, it can give persons that hold interest a guided view of the companies performance at a period of time.   

Step 2 KCQ’s

1.4- One of the connections that I have made with the fourth paragraph of chapter one is that learning is a personal experience. I can completely relate to this concept; in fact, I often struggle to learn from simply reading the textbooks and study guides. This became very apparent at the end of Accounting, Learning and Online Communication, for instance, I learnt a lot from completing the spreadsheets I could probably do it over again without Maria’s videos. However, when I came to making connections as to trends and economic drivers of my firm, all the things I had read and learnt in the study guide had escaped my memory.  

The accounting concept of Debit and Credit is confusing to me, mainly because it is in complete opposition to the debit and credit of my accounts. Where you use your debit card to purchase items, like a credit card. I believe this is because it is new, and it will take some time to grasp. I am aiming to memorise the three things, by putting sticky notes up around my house, and to help other students remember them; I will strive to utilise Peerwise. By rewriting the questions each week, this will help me memorise them and other students.

2.1 To me, businesses are a lot like my personal life. Of course, for some people, business is a big part of their professional lives, but for me not so much. Everyone is trying to add value to their own lives, be it through their careers, their goals or their family. Similarly, ledgers are like your bank accounts. All the transactions would be similar to the ones in a ledger, just on a much smaller scale. Income, liabilities and expenses would all be like the items in a firm’s ledgers. My husband and I have numerous accounts, like a firm. In our case, we divide our income up as it enters our bank accounts. We have a separate account for the mortgage, a savings account or emergency fund and various other accounts for everyday spending and significant upcoming expenses. By dividing up our income each month/week and making small contributions to the multiple accounts, we get to manage the risk of having to find a large sum of money, for say rego, on short notice. We do not have a credit card because the risk of not paying it off at the end of the month is a hefty interest fee. This works for our lifestyle, and it makes perfect sense for companies to have risk management for similar reasons.

2.2 My husband works as an ATM technician for an international security and cash transport company. My husband and all the other employees must look and handle hundreds of thousands of dollars, of cash every day, literally stacks of money. Although all the employees have had numerous national and international police checks, there must always be a risk of some cash going missing. Millions of dollars are shifted around in his company daily, from ATM maintenance to cash crew dropping money bags off to customers. Yet, when there is the slightest deviance in the amounts coming into the values going out, it is picked up immediately. The company frequently has to double-check that the correct cassettes have been returned and where they are signed in. 

2.3 Although I have never had to work with GST, yet. It seems very similar to the tax you pay on income. If you pay too much, you get a refund from the government at the end of the tax year, and if you don’t entirely pay enough, you end up with tax debt. I usually receive invoices from my children’s school for excursions, and I have recently come to notice that the invoices sent to me, declare the GST inclusive and is indicated as an extra fee under the billed amount. The school my children attend is rather large with many students, and yet the accounts clerk can send all the correct invoices to the right people and maintain the due or paid amounts. I assume this is mostly due to the ease and availability of accounting software these days. However, since reading this chapter, I have come to notice other aspects of my invoices that I hadn’t before. For instance, my invoice has a number like the ones in the study guide, for Coffee Supreme to trace in the accounts. Likewise, there is an invoice reference that is important to indicate what you paid regarding the invoice. The invoice also includes the invoice date and order number to make it easier to track the timeline of the invoice. All the information on the invoice seems to make it easier to trace in the system.

I can imagine that for every child or family, there would be an ‘account’ with the history of their transactions. When they were invoiced, when the invoice was paid and how it was paid, e.g. bank transfer or cash. This would be very similar to all other firms that have multiple customers, suppliers and employees.

2.4 A bank reconciliation seems like an invaluable tool for businesses to account for their cash flow and balance at any given time. It would certainly minimise the possibility of a somewhat dodgy accountant from syphoning money out of the company accounts. I’m sure this has been an issue for other companies from another era, as the accountant would have in-depth knowledge of the reports and if they were to transfer the money out, how would the manager or the owner even know?

To me, the perfect example of a non-current asset, in my life would be my car. I need my car to get to work, to earn money; however, it depreciates quickly. It is worth something at present, but every year it is worth less than the year before. I intend it to be used for many years to come. Still, the difference between the amount I will be able to sell it for after all those years and the amount I originally paid for it will be very different due to depreciation. Like Coffee Supreme, I need my car to help me earn an income, hopefully, more than the cost of depreciation over time. For me, my car gives me some personal benefits as well, like being able to take my family to the beach on the weekends. For businesses, their non-current assets are merely for business purposes.

In conclusion, firms seem to have numerous accounts to keep track of. In the current era of available technology, it seems a lot easier for them to keep track of all the ins and outs of the accounting side. There are many tools available to businesses to maintain and keep an eye on their available cash and non-current assets. I look forward to putting a lot of these concepts into practice in the next few steps.

Steps 3-6

Step 3: My Company

Analytica is a small-scale medical company located in Brisbane Australia. They focus primarily on women’s health and their best-selling product is the PeriCoach System, a medical device that is proven to reduce and reverse stress urinary incontinence in women, caused by trauma from pregnancy, childbirth and menopause. Likewise, PeriCoach System has been proven successful in preventing pelvic organ prolapse. As well as the best-selling PeriCoach System, Analytica is in the process of securing contracts for the supply of their AutoStart Burette infusion technology. With the needleless ports and reduced need for excessive syringes during IV use, this may be a game changer in infection control, within a hospital environment. Furthermore, Analytica focuses on the design and development of class 1 and 11 medical grade equipment. Analytica boasts longstanding management, that have been with the company for many years. Equally, the CEO’s and managers all have established medical careers behind them.

It has been a lot easier to find my companies finical statements this term and I was quite excited to see what my new company would be. The most significant difference that I have noted in Analytica’s financial statements and my previous company’s (Melbourne IT) financial statements, is the detail in the reports. Analytica uses a very simplistic and clinic design style, whereas Melbourne IT featured a lot of colour and design features. This may simply be linked with each company’s industry, Melbourne IT focused on website designs and builds, whereas Analytica is a medical company. Both of my companies have been of about equal size and have been active for around the same amount of time. However, Melbourne IT had lot of upcoming projects. Analytica on the other hand seems to depend on the already established PeriCoach System and the new AutoStart Burette Infusion technology. I am unsure on the requirements for medical equipment, so this may be a slow process, which would explain the lack of future projects. Analytica’s financial statements focus on the changes in financial position throughout the year. Clearly outlining the increased revenue and expenses incurred and explaining the reasons behind this. Likewise, Analytica’s financial statements enclose the amount of capital that is attributed to the company shareholders. At this time Analytica does not pay any dividends and the share price dropped from $0.04 in 2015 to $0.01 in 2016 where it has remained constant over the past few years.

The AutoStart Infusion System

With staff shortages a reality in today’s healthcare environment, the quality of care is often determined by how a healthcare worker’s time is managed. The Analytica Autostart Infusion System frees the healthcare worker to attend to more critical care areas.

The Analytica Autostart Infusion System is a simple and inexpensive solution to regular monitoring and refilling of burettes in intravenous fluid infusion.

The Autostart burette contains an enhanced float system that automatically restarts IV fluid flow following infused delivery of the predetermined amount of a required medication.

Autostart Burette Key Benefits

Automatic start of IV fluid after drug delivery, delivering uninterrupted IV flow. Simple to use, requiring little training.
Designed to meet international burette standard ISO 8536-5 and infusion set standard ISO 8536-4 (where applicable).
Can be operated as a standard burette by bypassing Autostart feature.
Operates without continual monitoring.
Cost effective. Carer time savings pay for each device many times over.
Can be used with gravity feed or above an infusion pump.

The AutoStart Infusion System is the first infusion system that allows modern infusion pumps to achieve their full potential.

A typical usage scenario is where the clinician wishes to give the patient a 150mL medicated bolus at a rate of 250mL/hour from the burette, and then return to the background rate of 40 mL/hour saline from the IV bag.

With a standard burette, the infusion pump will produce an alarm (e.g. occlusion, entrained air) once the 150mL bolus has been delivered from the burette. The nurse must then return to the patient, reset the alarm, open the flow from the IV bag, remove any air from the infusion line, set the new flow rate, and restart the infusion. Note also that any alarm can be quite discomforting for patients, so there may be a need to reassure the patient that this alarm is quite reasonable.

Compare that with an AutoStart Infusion System coupled with any of the modern infusion pumps capable of pre-programmed flow profiles. Here, the 150mL @ 250mL/hour, then 40mL/hour after that can be programmed in advance. Once the 150mL in the burette has been delivered, the AutoStart function automatically restarts the flow from the IV bag at the background rate. No other burette is capable of this operation. The nurse is not required to intervene. The nurse would then be free to address other matters with only routine monitoring of the patient necessary.

Flushing Feature

The AutoStart Infusion System can also be equipped with a flushing system which allows the needleless injection port and the medication delivery syringe to be flushed with saline from the IV bag, without the need for additional flushing syringes or ampules.

Why use a separate saline ampule or pre-filled syringe to recover all that valuable medicine, when you have an IV bag hanging right there?

With the AutoStart Infusion System’s new flushing feature:
All the drug is delivered to the patient.
No additional connections, reducing infection risks.
No additional swabs, saline ampules or syringes.
No extra time finding or managing the swabs and ampules.
Estimated cost savings of $2 per medication event.

The items listed in the financial reports are a lot easier to identify this time around, and I can already begin to break apart Analytica’s statements, to identify their financial and operating activities. From my brief scan of the financial reports, I can already see that Analytica has very few financial obligations and that their assets more than cover their small amount of liabilities. Analytica has very little comprehensive income and their profit is currently -$2.1 million, a daunting amount, however, much better than 2017 when it was -$3.2 million. Analytica’s financial statements are a lot easier to read than Melbourne IT’s were the last term, they have very few liabilities and assets, all of which are linked to employee benefits and inventories. The most significant expense they have is for the development of their medical technology, which I consider to be necessary. I also believe that the driving force behind Analytica is the research and development of their established products and the marketing to promote them. 

The key challenges that my company seems to be facing are the high expenses linked to the research and development of their technology. As a medical supplies company, I can understand why this is so vital, but it is apparent in the financial statements how much this is affecting the profit/loss of Analytica. The significant decline in 2017 has been reduced a lot in 2018, which looks promising for the future health of the company. The other considerable expense that Analytica faces is marketing, this is truthfully detailed in their financial statements and seems to be another necessary expense for a medical equipment company. They would have to advertise and have specialised people travel to hospitals and medical centres to promote their products. Analytica’s highest source of income seems to be from government grants and patents for their technology and further development. Likewise, they have had a steady stream of income from product sales and with the predicted potential earnings from the AutoStart Burette Infusion Technology, it could boost the company’s future revenue, as well as their share price. 

I have been unable to find any news articles focused on Analytica’s past, present or future activities except for the one revolving around the new Burette Infusion technology. Understandably, the medical device industry would have to be secretive as it is solely focused on future innovation and new ideas. Seeing as Analytica is a small Australian based company with only one notable product and one upcoming product, it is highly likely that there wouldn’t be much in the way of news articles.

 Step 4: My finances and chart of accounts.

I was excited to start this step of the assessment, although, I have looked at my finances before and have a set budget, I have never broken them down so thoroughly and in this way before. The tricky part was deciding to use all my various accounts or just a singular one. I chose to use our everyday account; it is the account where all our multiple expenses get paid from, and our income comes into. The first hurdle I came across was the everyday roundup, my husband and I use it to boost our savings and seeing as I was just using the singular everyday account, I was unsure on how to itemise these transactions. For this assessment, I chose to leave them out, as they are of no benefit to this assessment unless I am using all our accounts. The second hurdle I faced was itemising everything, deciding what each transaction would be named on my chart of accounts. It is clear to me why this is important and helpful for businesses and individuals alike but putting it into practice for the first time was new to me and did take a bit of time. 

What is a chart of accounts? To me, it is a list of all the expenditure within each account. I believe this is very important because the chart of accounts allows you to separate all the items of cash flow for the company. It is clearly developed to separate all the revenue, assets, liabilities and expenditure for a company and personally as well. By separating all the expenditure items, it allows you to get an understanding of a company’s or your own financial health and stability. I have found the process of developing my personal chart of accounts exciting, and it helped me realise that my husband and I are doing alright financially, even with our three small children. The main difference I have noticed between my chart of accounts and the one in the assessment information is the number of items I have on my own. I have looked through a few other student’s Step 4, and I have noticed that a lot of other students have a lot of transactions in their chart of accounts also.

The level of detail that I believe could be added would be a more direct time frame for when the most money comes in and when it goes out. Maybe the chart was broken down further, into weekly time blocks that showed when the most money was being spent and on what. That way, a company or individual could look at ways of reducing or ‘spreading out’ the expenses. It is confusing looking at the chart of accounts and trying to separate the individual items. Perhaps if there was another accompanying chart that had each code in order with all the items listed underneath. Of course, this is the first time I have done a chart of accounts, so it is going to be a lot to take in at first.

There are items that I could apply the accrual basis of accounting to and they are a few of the 1-2 Income Gifts/Benefits. More specifically, payments from friends and family. A lot of these items were payment for something I had purchased for them, i.e. group presents for other friends and my friends were paying me back the money owed. Another example would be item 1-3 Home Expense Water/Electricity. The electricity company provides electricity before receiving payment for consumption. In my understanding, the primary difference between cash basis accounting and accrual basis accounting is the timing. Cash basis is focused on recording revenues and expenses only when the cash changes hands. On the other hand, accrual basis accounting focuses on revenues and expenditures being recognised when income is earned and when expenses are billed even when no money has been exchanged, yet. The difference between the cash basis and the accrual basis in my chart of accounts. Would be the difference between paying for electricity after being billed for the electricity already consumed, and paying for shopping immediately, before being allowed to take the items out of the store. 

Step 5: The trial balance

Upon starting the trial balance, I was, as always excited. I prefer to be hands-on when learning new concepts. I have been struggling with university recently due to the whole Coronavirus and having all three kids at home in isolation, has been an unending challenge for motivation and stress management. I had thought seriously about throwing in the towel on all my units this semester. But, after some serious thought, I decided to try and just power through. After reading the study guide and task description, I felt a little more confident and thought it would be easy. After all, I simply had to use my companies’ financial statements and input them into the spreadsheet. The balance sheet was a piece of cake, everything totalled out nicely, and I thought it would be smooth sailing all the way. Then came the Income statement, this one didn’t total out, and I tried everything to figure it out myself, before using the lecture resources to guide me. The end of the Income statement left a deficit on the debit side, it took me longer than I would have liked to figure out that the debt equalled the total loss of income. For the trial balance part, I used the week 4 lecture to double-check my previous work and to walk through the Trial Balance side. My company didn’t have much in the way of comprehensive income, and I am still unsure as to whether I have used the correct items. I was lucky in this aspect because it seemed quite complicated having to deduct the items from the revenue items in the trial balance. After finishing the relevant lecture, my trial balance lined up and balanced perfected at the end.

Overall, this has been an exciting assessment, and I look forward to the others in this unit. I had never thought of how each of the financial statements accounted for everything, and I would never have realised that the other comprehensive income had already been considered for in the revenue items. The trial balance has been a little like reassembling a jigsaw puzzle and seeing where all the small pieces fit together.