Key Concepts & Questions

Chapter 1

Before I started this course, if you asked me “what is accounting”, I probably would’ve given some answer such as “the finance of a business” or “all the businesses accounts”. However, it’s after reading such an insightful chapter such as “A way of viewing business” that I took all these misconstrued ideas I had, and tossed them out the window. Because accounting so much more than just numbers. Yes, it still involves the numbers of a business, but I believe that accounting is the heart of a business. It gathers information on a firm’s economic and business realities, and allows us to deconstruct, and decipher what’s happening in the business, what’s especially happening with the financial side.

Personally, I don’t see how accounting could in any way hinder a business. I can definitely see how it would help to connect us to the firm better.

I did find it quite interesting that half of the directors of companies within Australia and New Zealand have accounting qualifications, which made me question, why? Is it so that they’re able see a business differently, that they understand the economic and business realities of a firm, and can look at them with a different outlook than just an unqualified person? Or are they sourced particularly because they’ve got accounting backgrounds? I’m interested to research further and know the answer, it’s a bit like which came first the chicken or the egg.

Reading through, I’m still a bit fuzzy on a trust type of business. I guess if there was an example it possibly could’ve helped, but I think I’ll need to do more research to simplify my idea of what a trust is when it comes to business.

Reading about ledgers and journals drummed up accounting years in high school, where I would enter any asset entry into the books, with a corresponding opposite entry. I smiled reading through this part of the book, because it was something I understood and was familiar with! Also really helped knowing a bit of the background of how double-entry book keeping was thought up.

I’m still to gain a firmer understanding on the term equity. At the moment I’ve got ideas floating around my head of what equity is, but I still need to learn a bit more about it to concrete those words in. However, assets, liabilities, revenue & expenses, I understand all those elements quite well.